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PREFACE. 


TO  the  views  set  forth  in  this  little  book 
the  author  asks  that  a  fair  and  unpreju- 
diced consideration  may  be  given.  As  those 
views  are  new  and  have  not  yet  penetrated 
into  the  professorial  mind,  they  must  stand 
or  fall,  not  by  the  weight  of  authority  or  pre- 
cedent, but  by  the  strength  or  weakness  of 
the  arguments  adduced  in  their  support.  Of 
the  critics,  if  they  shall  deign  to  notice  him, 
the  author  asks  that  they  will  endeavor  to 
make  sure  that  they  understand  his  views 
before  they  attack  them,  and  will  not  set  up 
as  his,  and  then  proceed  to  demolish,  views 
and   arguments  for  which  he    is   in   no  way 

responsible. 

URIEL    II.   CROCKER. 

Boston,  March,  1895. 


7584 34 


TABLE   OF  CONTENTS. 


Chapter  Page 

I.     Principal  Characteristics  of    Hard  Times       7 
II.     The  most  Prominent  Characteristic  an  Ex- 
cessive Capacity  of    Production,  and  a 
resulting  Amount  of  Products  in  Excess 
of  the  Demand  for  them 13 

III.  A  General  Excess  of  Production  over  De- 

mand has  been  alleged  by  Economists 

to  be  Impossible 15 

IV.  The  Arguments  by  which  the  Economists 

have   supported    their    Position    stated, 

and  their  Validity  doubted 18 

V.  The  Position  of  the  Economists  shown  to 
be  a  False  One.  There  may  be  a  Gen- 
eral Excess  of  Production  resulting 
from  an  Excessive  Amount  of  the  Ma- 
chinery of  Production 23 

VI.  Statements  by  other  Writers  confirmatory 
of  the  Views  set  forth  in  the  preceding 
Chapter 27 


iv  TABLE    OP    CONTENTS. 

Chapter  Page 
VII.     An  Excessive  Amount  of  the  Machinery  of 
Production  accounted  for  as  a  Result  of 
an  Excessive  Demand  for  Income-pro- 
ducing Investments 34 

VIII.  The  Excessive  Demand  for  Income-pro- 
ducing Investments  arises  from  an  Ex- 
cessive Desire  to   Save  rather  than  to 

Spend 39 

IX.     How  the  Lost  Equality  between    Produc- 
tion and  Demand  may  best  be  restored     48 
\  /  X.     Why  the  recent  Hard  Times  began  when 
they  did,  and  how  soon  we  may  expect 

them  to  end 52 

XI.     Historical   Facts  confirming  the  Author's 

Theory 5  7 

XII.     Some  Practical  Conclusions 63 

XIII.  The  Origin  of   "Trusts" 71 

XIV.  The  Difference  between  the  Author's  Views 

and  those  of  the  Economists  a  Radical 

One 74 

XV.     The  Economists'  Explanation  of  the  "  Ten- 
dency of  Profits  to  a  Minimum  "  shown 
to  be  Antiquated  and  Inadequate      .     .      77 
XVI.     Some  Prognostications  as  to  the  Future  .     79 


TABLE    OF    CONTENTS.  V 
Chapter                         ^  Page 
XVII.     A  more  Technical  Argument,  addressed 
particularly   to   Professional    Econo- 
mists    83 

XVIII.     A  Harvard  Professor's  Question  ...  95 
XIX.     Previous  Writings  by  the  Author  and  by 

Others  on  the  Subject  of  this  Book    .  102 

Index 109 


THE 

CAUSE    OF    HARD  TIMES. 


CHAPTER   I. 

PRINCIPAL   CHARACTERISTICS   OF   HARD   TIMES. 

THE  people  of  the  United  States,  and  to 
a  perhaps  less  extent  those  of  Europe 
also,  have  recently  been  suffering  from  a 
period  of  extreme  depression  in  trade,  or,  in 
other  words,  from  what  are  called  "hard 
times. "  About  twenty  years  ago  there  was 
a  similar  period  of  depression,  and  during 
the  whole  interval  since  that  time  therejias 
been  much  trouble  of  the  same  kind,  j  The 
evidences  of  the  present  depression  are  well 
known.  Laboring  menhave  found  it  im- 
possible  to  obtain  their  usual  employment. 
ISTalmfacturing  estabHshmentsliave  been  un-/"; 
jtble  to__find  any  profitable  use  for  all  their 


8  THE   CAUSE    OF   HARD   TIMES. 

machinery,    and   many   of  them   have   been 


compelled  either  to  continue  tn  t.mu*-*wt  pro- 
duets  at  a  loss,  to  cut  down  wages,  or  to 
close  up  altogether.  The  railroads  of  the 
country  have  been  without  their  usual  amount 
of  passengers  and  of  freight,  and  have  been 
driven  to  curtail  their  expenses  by  a  large 
dismissal  of  employees,  —  the  weaker  rail- 
roads having  been  forced  into  the  hands  of 
receivers,  while  the  stronger,  by  reason  of 
the  falling  off  of  their  profits,  have  been 
compelled  to  reduce  or  to  omit  altogether 
the  dividends  to  their  stockholders.  Shop- 
keepers have  complained  that  their  trade 
has  fallen  offT"  and  that  consequently  they 
h ave  been  unable  to  pay  to  their  landlord s 
the  usual  rents.  And,  finally,  capitalists 
have  found  so  small  a  demand  for  their  funds 
that  money  has  been  a  drug  in  the  market, 
and  only  loanable  at  rates  of  interest  unpre- 
cedentedly  low.      I 

Under  these  circumstances  it  would  seem 
to  be  a  fact  beyond  dispute  that  the  imme- 
diate cause  of  the  depression  is  to  be  found 
in  a  falling  off  in  the  demand  for  the  pro- 


THE    CAUSE    OF    HARD    TIMES.  9 

ducts  of  labor,  —  meaning  by  "demand,"  not 
tbat  demand  which  seeks  to  obtain  a  product 
as  a  gift  or  for  an  inadequate  price,  but  the 
demand  which  is  ready  and  willing  to  pay  to 
the   producer   a  remunerative  price  for  his 
product.      It  is  surely  the  falling  off  in  this 
demand   that  has  deprived  the  shop-keeper 
of  his  trade,  the  manufacturer  of  a  market 
for  his  products,  the  railroad  of  its  freight 
and  its  passengers,  the  laborer  of  his  employ- 
ment, and  the  capitalist  of  the  usual  return 
of  interest  upon  his  money.  fit  is  also  clear 
that  an  increase  in  this  demand  would   set 
all  the  wheels  of  industry  in  motion,  would 
restore  his  trade  to  the  shop-keeper,  would 
make  busy  again  the  machinery  of  the  manu- 
facturer, would  load  the  railroads  again  with 
freight    and    with    passengers,    would    give 
employment  once  more  to  all  the  great  army 
of  laboring  men,  and  would  cause  capital  to 
be  again  in  demand  and  the  current  rate  of 
interest  to  rise.     These  things  are  at  last  so 
plain  that  one  can  hardly  find  even  a  pro- 
fessor of    political  economy  rash  enough  to 
denv  them. 


10  THE    CAUSE    OF   HARD   TIMES. 

This  strange  condition  of  affairs, — this 
distress  in  the  midst  of  plenty,  — this  super- 
abundance of  laborers  and  of  the  machinery 
of  production,  ready  for  employment,  but 
unable  to  find  it,  — this  apparently  complete 
equipment  of  the  world  with  factories  and 
railroads  and  warehouses  and  willing  hands, 
all  eager  to  join  in  the  work  of  creating  and 
distributing  products  for  the  comfort  and 
pleasure  of  mankind,  but  all  held  in  check 
and  forced  to  remain  idle  by  some  strange 
power  that  paralyzes  them,  —  these  phenom- 
ena would  seem  to  furnish  a  subject  of  pecu- 
liar interest  and  of  especial  importance  for 
the  student  of  political  economy.  But, 
strangely,  the  professors  of  that  science  sel- 
dom touch  upon  this  subject  in  their  books 
or  in  the  journals  devoted  to  their  special 
branch  of  learning.  Indeed,  it  would  almost 
seem  as  if  it  were  a  subject  avoided  by  them 
from  a  feeling  of  their  entire  inability  to 
grapple  with  it. 

At  the  time  of  the  great  depression  in  trade 
that  occurred  about  twenty  years  ago,  the 
professors  did  indeed  have  some  theories  to 


THE   CAUSE   OF   HARD    TIMES.  11 

air  and  some  advice  to  give.  Then,  one  of 
the  leaders  among  them,  Professor  Bonamy 
Price,  the  Professor  of  Political  Economy 
in  the  University  of  Oxford,  England,  an- 
nounced in  the  Contemporary  Review  for 
April,  1877,  (p.  787,)  that  the  cause  of  the 
then  existing  trouble  was  "one  and  one 
only,  —  over-spending,  over-consuming,  de- 
stroying more  wealth  than  is  reproduced,  and 
its  necessary  consequence,  poverty."  This 
theory  was,  however,  plainly  at  variance 
with  undisputed  facts.  A  people  suffering 
from  "over-spending,  over-consuming,  de- 
stroying more  wealth  than  is  reproduced," 
cannot  possibly  find  itself,  as  we  found  our- 
selves then,  and  again  find  ourselves  to-day, 
possessed  of  multitudes  of  usable  but  unused 
products  of  labor,  of  an  excess  of  idle  ma- 
chinery, and  of  multitudes  of  men  and  women 
unable  to  find  employment.  Poverty,  which 
Professor  Price  correctly  called  the  "  neces- 
sary consequence "  of  over-spending,  is  al- 
ways evidenced  by  a  scarcity,  rather  than 
an  abundance,  of  the  products  of  labor,  and 
by  a  large  demand  for  labor  to  make  good 


12  THE    CAUSE   OF    HARD   TIMES. 

the  previous  waste.  Apparently,  indeed,  the 
professors  of  political  "  economy  "  have  felt 
bound  to  consider  "  economy  "  to  be  the  rem- 
edy for  all  evils,  and  the  want  of  "economy  " 
the  cause  of  every  kind  of  mischief,  and  in 
their  attempt  to  carry  out  these  ideas  they 
have  been  reduced,  like  Professor  Price,  to 
the  necessity  of  explaining  a  condition  of 
abundance  by  making  it  the  result  of  waste, 
—  of  explaining  a  condition  where  men  can- 
not find  any  work  to  do  in  the  creation  of 
products,  by  making  that  condition  the  result 
of  a  wasteful  destruction  and  consequent 
scarcity  of  products. 

If,  then,  we  get  no  light  from  the  profes- 
sors, let  us  examine  the  subject  for  our- 
selves, and  see  whether  we  can  discover  the 
true  cause  of  the  phenomena  which  constitute 
the  so-called  "hard  times,"  or  "depression 
in  trade." 


CHAPTER   II. 

THE  MOST  PROMINENT  CHARACTERISTIC  AN 
EXCESSIVE  CAPACITY  OP  PRODUCTION, 
AND  A  RESULTING  AMOUNT  OF  PRODUCTS 
IN   EXCESS   OP   THE   DEMAND    FOR   THEM. 

AS  has  been  already  stated,  the  one  con- 
clusion which  we  may  draw,  of  the 
truth  of  which  it  would  seem  that  there  can 
be  no  dispute,  is  this,  —  that  at  the  present 
time  the  capacity  of  production  of  this  coun- 
try, the  capacity  of  its  machinery  and  of  its 
laboring  classes  to  produce  and  distribute 
useful  products,  is  far  in  excess  of  the  remu- 
nerative demand  for  those  products.  There 
is  surely  nothing  to  keep  idle  machinery 
and  willing  hands  from  creating  and  dis- 
tributing products,  if  those  products  can  be 
disposed  of  at  a  profit  to  the  producers.  The 
fact  is  that  the  producers  are  all  ready  and 
waiting,  but  the  buyers  are  wanting.     Plainly 


14  THE    CAUSE    OF   HARD    TIMES. 

the  country's  capacity  of  production  has  for 
the  time  run  ahead  of  its  demand  for  con- 
sumption, and  this  excess  of  capacity  of  pro- 
duction has  only  been  made  evident  to  the 
producers  by  an  actual  excess  of  production 
over  the  demand  for  consumption,  — by  their 
discovery  that  they  have  stocks  of  goods  on 
hand  which  are  in  excess  of  the  amount 
which  is  called  for  at  remunerative  prices. 
This  condition  of  affairs,  this  inequality 
between  production  and  consumption,  be- 
tween supply  and  demand,  may  properly  be 
called  either  "  over-production  "  or  "  under- 
consumption."  Each  term  equally  well 
describes  the  situation,  and  each  has  been 
employed  by  different  writers,  but  that  which 
has  been  most  usually  employed  by  econo- 
mists has  been  "  OArer-production. " 


CHAPTER   III. 

A  GENERAL  EXCESS  OF  PRODUCTION  OVER 
DEMAND  HAS  BEEN  ALLEGED  BY  ECONO- 
MISTS  TO   BE   IMPOSSIBLE. 

AT  this  point,  however,  we  encounter  a 
difficulty.  It  is  claimed  by  econo- 
mists that,  while  over-production  of  a  par- 
ticular product  is  possible,  and  in  fact  often 
happens,  a  general  over-production,  or  gen- 
eral excess  of  production  over  demand,  is  in 
the  nature  of  things  an  utter  impossibility. 
Thus  John  Stuart  Mill,  in  his  "Principles 
of  Political  Economy  "  (book  3,  chapter  14, 
sections  1  and  3),  says:  "Because  this  phe- 
nomenon of  over-supply  and  consequent  in- 
convenience or  loss  to  the  producer  or  dealer 
may  exist  in  the  case  of  any  one  commodity 
whatever,  many  persons,  including  some  dis- 
tinguished political  economists,  have  thought 
that  it  may  exist  with  regard  to  all    com- 


16  THE   CAUSE    OF    HARD    TIMES. 

modifies,  — that  there  may  be  a  general  over- 
production  of  wealth,  a  supply  of  commodi- 
ties in  the  aggregate  surpassing  the  demand, 
and  a  consequent  depressed  condition  of  all 
classes  of  producers.  .  .  .  There  may  easily 
be  a  greater  quantity  of  any  particular  com- 
modity than  is  desired  by  those  who  have  the 
ability  to  purchase,  and  it  is  abstractly  con- 
ceivable that  this  might  be  the  case  with  all 
commodities.  The  error  is  in  not  perceiv- 
ing that,  though  all  who  have  an  equivalent 
to  give  might  be  fully  provided  with  every 
consumable  article  which  they  desire,  the 
fact  that  they  go  on  adding  to  the  production 
proves  that  this  is  not  actually  the  case." 

The  great  weight  of  the  name  of  John 
Stuart  Mill,  and  his  reputation  as  a  sound 
reasoner,  have  caused  this  conclusion  of  his 
to  be  accepted  by  economists  as  sacred  truth. 
With  the  ordinary  economist,  to  assert  the 
possibility  of  general  over-production  is  to 
commit  the  unpardonable  sin.  Thus,  in  an 
article  by  Moreton  Frewen  on  '-'  Gold  Scarcity 
and  the  Depression  in  Trade,"  in  the  Nine- 
teenth Century  for  October,  1885,  we  read: 


THE    CAUSE    OF   HARD    TIMES.  17 

"People  of  little  education  are  accounting  for 
low  prices  on  the  hypothesis  of  general  over- 
production ;  but  it  is  hardly  necessary  to 
point  out  that,  while  over-production  in  any 
particular  trade  is  frequent,  and  quickly 
adjusts  itself,  general  over-production  is 
impossible."  And  Mr.  Edward  Atkinson, 
in  an  address  on  the  "Statistics  of  Con- 
sumption," printed  in  the  Boston  Sunday 
Herald  for  July  5,  1885,  says:  "I  desire  to 
examine  the  outside  of  the  head  of  any  one 
who  pleads  a  general  over-production,  in 
order  to  see  how  his  brain  is  constituted, 
and  what  element  of  common  sense  has  been 
omitted  in  his  make-up." 


CHAPTER   IV. 

THE  ARGUMENTS  BY  WHICH  THE  ECONOMISTS 
HAVE  SUPPORTED  THEIR  POSITION  STATED, 
AND    THEIR    VALIDITY    DOUBTED. 

EVEN  at  the  risk  of  incurring  the  con- 
tempt of  Messrs.  Frewen  and  Atkin- 
son, and  of  the  whole  tribe  of  professors  of 
Political  Economy,  I  will  venture  to  exam- 
ine into  the  soundness  of  Mill's  position.  In 
the  first  place,  I  may  mention  that  those  who 
look  only  at  the  facts,  not  troubling  them- 
selves about  theory,  are  unanimously  of  the 
opinion  that  a  state  of  general  over-produc- 
tion has  existed  during  the  past  few  years. 
The  practical  man  asks  what  class  of  pro- 
ducers (not  in  the  enjoyment  of  a  monopoly) 
there  is  which  has  not  felt  and  believed  that 
its  own  class  of  products  has  been  over-pro- 
duced. If  such  a  complaint  came  from  a 
few  only,  the  followers  of  Mill  would  admit 


THE   CAUSE    OF   HARD   TIMES.  19 

that  it  might  be  well  founded,  as  he  allowed 
over-production  in  special  branches  to  be 
possible;  but  general  over-production  he 
claimed  to  be  impossible.  If  people  gener- 
ally complain  that  they  have  been  suffering 
from  that,  they  must,  according  to  his  doc- 
trine, be  under  a  delusion.  As  an  illustra- 
tion how  closely  the  modern  economists  hold 
to  the  views  of  Mill,  the  following  words  from 
Macvane's  "Political  Economy"  (published 
in  1890)  are  here  quoted :  "  Any  one  commod- 
ity, or  any  limited  number  of  commodities, 
may  be  produced  in  excess  of  the  demand  at 
any  time;  but  it  is  quite  impossible  that  all 
products  should  be  in  excess  of  the  demand 
at  one  and  the  same  time.  If  the  supply 
of  some  tilings  is  excessive,  the  supply  of  other 
things  is  deficient  to  the  same  extent."  (Chap. 
27,   sect.   1.) 

Is  it  possible  that  Mill  and  the  theorists 
are  right,  and  the  practical  men  all  deluded  ? 
Is  it  possible  that  during  all  these  hard  times 
there  have  been,  hidden  somewhere,  classes  of 
products  which,  as  is  claimed  by  Professor 
Macvane,  have  been  under-produced,  —  the 


20  THE    CAUSE    OF    HARD    TIMES. 

supply  of  which  has  not  been  equal  to  the 
demand  for  them,  —  and  the  under-production 
of  which  has  been  sufficient  to  offset  the  over- 
production of  other  things,  and  to  reduce  the 
average  of  production  to  an  equality  with  the 
average  of  demand  ?  If  there  have  been  any 
such  under-produced  products,  —  products  for 
which  the  demand  has  exceeded  the  supply, 
—  there  must  certainly  have  been  a  great 
profit  derivable  from  the  business  of  furnish- 
ing those  products  to  customers  eager  and 
able  to  pay  for  them.  Can  it  be  that  in  this 
enterprising  nation  no  one  has  been  able  to 
discover  what  these  under-produced  products 
were,  and  to  employ  in  their  production  some 
of  the  vast  amount  of  idle  capital  which  has 
so  long  been  seeking  in  vain  for  some  prof- 
itable employment  ?  It  would  seem  to  be 
impossible  for  even  Professor  Macvane  to 
answer  these  questions  in  the  affirmative. 

If  then  observed  facts  appear  to  be  so  much 
at  variance  with  theoretical  conclusions,  we 
can  with  more  confidence  examine  into  the 
arguments  of  the  theorists.  Mill's  state- 
ment is  that  the  "  error  "  of  those  who  have 


THE    CAUSE    OF   HAKD   TIMES.  21 

supposed  general  over-production  to  be  possi- 
ble consists  "  in  not  perceiving  that,  though 
all  who  have  an  equivalent  to  give  might  be 
fully  provided  with  every  consumable  article 
which  they  desire,  the  fact  that  they  go  on 
adding  to  the  production  proves  that  this  is 
not  actually  the  case."  In  other  words, 
Mill's  argument  is  that  no  man  creates  a 
product  except  for  the  purpose  of  supplying 
himself  with  some  other  product  which  he 
desires,  and  that  his  production  of  his  own 
product  is  always  strictly  proportioned  to 
his  desire  to  obtain  other  men's  products  in 
exchange  for  his  own.  Thus  he  limits  the 
amount  of  the  production  of  each  individual 
to  an  amount  which  cannot  exceed  that  of 
his  own  demand  for  the  products  of  others, 
and  consequently  the  production  of  the  whole 
community,  which  is  the  aggregate  of  the 
production  of  all  the  individuals  compos- 
ing that  community,  must  according  to  Mill 
be  limited  to  and  cannot  exceed  the  aggre- 
gate of  the  demand  of  all  those  individuals, 
and  thus  a  general  over-production,  or  gen- 
eral excess  of   production   over  demand,    is 


22  THE   CAUSE    OF    HARD   TIMES. 

made  impossible.  But  if  it  can  be  shown 
that  men  sometimes  carry  on  production,  not 
primarily  and  solely  for  the  purpose  of  sup- 
plying themselves  with  the  products  of  others, 
but  for  an  entirely  different  and  independent 
reason,  Mill's  argument  necessarily  falls  to 
the  ground. 


CHAPTER   V. 

THE  POSITION  OF  THE  ECONOMISTS  SHOWN  TO 
BE  A  FALSE  ONE.  —  THERE  MAY  BE  A 
GENERAL  EXCESS  OF  PRODUCTION  RESULT- 
ING FROM  AN  EXCESSIVE  AMOUNT  OF  THE 
MACHINERY    OF    PRODUCTION. 

THAT  a  powerful  incentive  to  production, 
other  than  the  desire  of  the  producer 
to  obtain  the  products  of  others,  exists  at  the 
present  day,  cannot  well  be  denied.  This 
incentive  is  to  be  found  in  the  willingness 
of  the  owners  of  the  present  immense  amount 
of  machinery  of  production  to  keep  that 
machinery  busy  in  the  work  of  creating  pro- 
ducts, even  when  they  can  only  dispose  of 
those  products  for  less  than  cost,  rather  than 
to  suffer  the  greater  loss  that  must  come  to 
them  if  that  machinery  is  allowed  to  lie  idle. 
They  often  continue  for  long  periods  to  carry 
on  production,  not  because  they  hope  there- 
by to  gain  a  supply  of  products  exceeding 
what   they   already   have,    but    with    a   sure 


24  THE    CAUSE    OF    HARD   TIMES. 

knowledge  that  the  daily  result  of  their  pro- 
duction is  a  decrease  of  their  supply  of  pro- 
ducts, a  diminution  of  their  wealth,  a  net 
loss.  And  the  way  in  which  this  is  brought 
about  is  as  follows. 

In  recent  years  the  machinery  of  production 
has  been  created  so  extensively  that  in  very 
many  branches  of  industry  its  capacity  of 
produetion  has  been  largely  in  excess  of  the 
demand  for  its  products.  And  when  this  ex- 
cessive machinery  is,  as  is  usually  the  case, 
the  property  of  different  competing  producers, 
the  now  familiar  result  is  brought  about  that 
these  competitors  find  at  last  that  there  is  no 
remunerative  demand  for  all  their  products. 
Some  producer's  machinery  must  stop  its 
work,  or  all  the  producers  will  find  that  it  is 
impossible  to  dispose  of  their  products  except 
at  less  than  the  ordinary  profit,  or  perhaps 
not  otherwise  than  at  a  loss.  But  stoppage 
itself  involves  a  loss,  and  ordinarily  a  greater 
loss  than  continued  production.  The  owner 
of  idle  machinery  has  upon  his  hands  a 
costly  article  of  property,  which  involves 
him  in  continual  expense  for  its  care  and  for 


THE    CAUSE   OF   HARD    TIMES.  25 

its  protection  from  the  weather,  from  fire, 
and  from  thieves,  and  which,  in  spite  of  all 
that  he  can  do  to  preserve  it,  will  rapidly 
deteriorate  through  rust  and  decay.  He  will 
also,  by  allowing  his  machinery  to  lie  idle, 
suffer  a  further,  and  in  most  cases  a  more 
serious,  loss  from  parting  with  and  scatter- 
ing beyond  recall  the  skilled  workmen  who 
have  been  running  that  machinery,  and  from 
driving  the  customers,  who  have  been  in  the 
habit  of  buying  his  products,  to  seek  else- 
where for  their  usual  supply;  and  it  is  well 
known  that  a  course  of  trade  once  diverted  is 
not  easily  restored  to  its  old  channel.  Under 
these  circumstances,  it  is  evident  that  a  large 
and  powerful  body  of  producers  —  namely, 
the  owners  of  the  immense  amount  of  the 
machinery  of  production  —  may  well  be 
brought,  and  in  many  recent  cases  have  actu- 
ally been  brought,  to  the  creation  of  products 
to  an  amount  not  based  upon  and  propor- 
tioned to  the  demand  for  those  products,  but 
based  mainly  on  the  producers'  own  desire 
to  save  and  protect  their  machinery  and  their 
Imsiness.     In  order  to  save  and  protect  these 


26  THE    CAUSE    OF   HARD    TIMES. 

important  elements  of  wealth,  they  have  been 
ready  and  willing  to  maintain  and  continue 
a  production  which  has  not  only  involved  no 
profit,  but  which  has  often  brought  them 
actual  loss.  Thus  we  find  it  to  be  true  that 
there  may  be  a  production  which  is,  with  the 
knowledge  of  the  producer  and  intentionally, 
in  excess  of  the  producer's  demand  for  the 
products  of  others;  or,  in  other  words,  we 
find  that  the  fact  that  men  "go  on  adding  to 
the  production  "  does  not  prove  that  they  are 
necessarily  and  solely  actuated  by  a  desire 
to  increase  their  store  of  "consumable  arti- 
cles," but  that  they  may  be  actuated  only 
by  a  desire  to  lessen  an  unavoidable  decrease 
of  their  store  of  such  articles,  and  Mill's 
argument  to  prove  the  impossibility  of  gen- 
eral over-production  is  shown  to  be  founded 
in  error,  and  it  is  made  plain  that  there  may 
exist,  and  have  in  fact  existed,  periods  of 
so-called  general  over-production ;  —  or,  in 
other  words,  periods  when  there  has  been  a 
general  excess  of  products  over  and  beyond 
the  demand  for  them  at  prices  remunerative 
to  the  producers. 


CHAPTER   VI. 

STATEMENTS  BY  OTHER  WRITERS  CONFIRMATORY 
OF  THE  VIEWS  SET  FORTH  IN  THE  PRE- 
CEDING   CHAPTER. 

THE  actual  working  of  the  process  by 
which,  first,  an  excessive  amount  of 
machinery  is  created,  and  afterwards  that 
machinery  is  run  at  a  loss  by  its  owner  in 
his  desire  to  save  himself  from  the  greater 
loss  that  would  result  from  its  stoppage,  has 
been  well  described  by  Mr.  Andrew  Carne- 
gie, a  practical  manufacturer,  widely  known 
and  of  recognized  ability,  in  an  article  on 
"Trusts,"  in  the  North  American  Ueview  for 
February,  1889.  Mr.  Carnegie  there  says 
(pp.  141,  142) :  - 

"A  demand  exists  for  a  certain  article, 
beyond  the  capacity  of  existing  works  to 
supply  it.  Prices  are  high,  and  profits 
tempting.     Every  manufacturer  of  that  arti- 


28  TIIK    CAUSE    OF   HARD   TIMES. 

cle  immediately  proceeds  to  enlarge  his 
works  and  increase  their  producing-  power. 
In  addition  to  this,  the  unusual  profits  attract 
the  attention  of  his  principal  managers,  or 
of  those  who  are  interested  to  a  greater  or 
less  degree  in  the  factory.  These  communi- 
cate the  knowledge  of  the  prosperity  of  the 
works  to  others.  New  partnerships  are 
formed,  and  new  works  erected,  and  before 
long  the  demand  for  the  article  is  fully  satis- 
fied, and  prices  do  not  advance.  In  a  short 
time  the  supply  becomes  greater  than  the 
demand ;  there  are  a  few  tons  or  yards  more 
in  the  market  for  sale  than  are  required,  and 
the  prices  begin  to  fall.  They  continue  fall- 
ing until  the  article  is  sold  at  cost  to  the 
less  favorably  situated  or  less  ably  managed 
factory,  and  even  until  the  best  managed  and 
best  equipped  factory  is  not  able  to  produce 
the  article  at  the  price  at  which  it  can  be 
sold.  Political  economy  says  that  here  the 
trouble  will  end.  Goods  will  not  be  pro- 
duced at  less  than  cost.  This  was  true  when 
Adam  Smith  wrote ;  but  it  is  not  quite  true 
to-day.     When  an  article  was  produced  by  a 


THE   CAUSE    OF   HARD    TIMES.  *  29 

small  manufacturer,  employing,  probably  at 
his  own  house,  two  or  three  journeymen  and 
an  apprentice  or  two,  it  was  an  easy  matter 
for  him  to  limit  or  even  to  stop  production. 
As  manufacturing  is  carried  on  to-day,  in 
enormous  establishments,  with  live  or  ten 
millions  of  capital  invested,  and  with  thou- 
sands of  workers,  it  costs  the  manufacturer 
much  less  to  run  at  a  loss  per  ton  or  yard 
than  to  check  his  production.  Stoppage 
would  be  serious  indeed.  The  condition  of 
cheap  manufacture  is  running  full.  Twenty 
sources  of  expense  are  fixed  charges,  many 
of  which  stoppage  would  only  increase. 
Therefore,  the  article  is  produced  for  months, 
and  in  some  cases  that  I  have  known  for 
yours,  not  only  without  profit  or  without 
interest  upon  capital,  but  to  the  impairment 
of  the  capital  invested.  Manufacturers  have 
balanced  their  books  year  after  year,  only  to 
find  their  capital  reduced  at  each  successive 
balance.  While  continuing  to  produce  may 
be  costly,  the  manufacturer  knows  too  well 
that  a  stoppage  would  be  ruin." 

Mr.   David  A.   Wells  has  made  a  similar 


30  THE    CAUSE    OF   HARD   TIMES. 

statement  in  his  "  Recent  Economic  Changes," 
published  in  1889,  (p.  73,)  as  follows:  — 

"It  was  formerly  a  general  assumption 
that,  when  price  no  longer  equalled  the  cost 
of  production  and  a  fair  profit  on  capital, 
production  would  be  restricted  or  suspended ; 
that  the  less  favored  producers  would  be 
crowded  out,  and,  by  the  relief  thus  afforded 
to  the  market,  normal  prices  would  be  again 
restored.  But  this  doctrine  is  no  longer 
applicable  to  the  modern  methods  of  produc- 
tion. Those  engaged  in  great  industrial 
enterprises,  whether  they  form  joint-stock 
companies,  or  are  simply  wealthy  individ- 
uals, are  invested  with  such  economic  powers 
that  none  of  them  can  be  easily  pushed  to 
the  wall',  inasmuch  as  they  can  continue  to 
work  under  conditions  that  would  not  permit 
a  small  producer  to  exist.  Examples  are 
familiar  of  joint  stock  companies  that  have 
made  no  profit  and  paid  no  dividends  for 
years,  and  yet  continue  active  operations. 
The  stockholders  are  content  if  the  plant  is 
kept  up,  and  the  working  capital  preserved 
intact;   and,  even   when   this   is   not   done, 


THE    CAUSE  OF  HAKD  TIMES.  31 

they  prefer  to  submit  to  assessments,  or  to 
issue  preferred  shares  and  take  them  up 
themselves,  rather  than  go  into  liquidation, 
with  the  chance  of  losing  their  whole  capital. 
Another  feature  of  such  a  condition  of  things 
is  that  the  war  of  competition,  in  which 
such  industrial  enterprises  are  usually  en- 
gaged, is  usually  carried  on  by  a  greater  and 
greater  extension  of  the  market  supply  of 
their  products.  .  .  .  Under  such  circum- 
stances, industrial  over-production,  mani- 
festing itself  in  excessive  competition  to 
effect  sales  and  in  a  reduction  of  prices 
below  the  cost  of  production,  may  become 
chronic."  1 

1  The  following  quotations  from  the  author's  pamphlet 
entitled  "Over-production  and  Commercial  Distress"  (pp. 
16-18),  published  in  1887,  are  here  given,  in  order  to  show 
that  Messrs.  Carnegie  and  Wells  had  been  anticipated  by 
this  author  in  their  statement  of  the  causes  of  recent  over- 
production. Indeed,  the  similarity  in  the  form  of  the  three 
statements  would  seem  to  show  that  this  author  furnished 
to  the  two  later  writers  the  unacknowledged  basis  for  their 
above  quoted  statements. 

"Modern  society  has  brought  in,  to  complicate  the  prob- 
lem which  Mill  attempted  to  solve,  at  least  one  new  and  im- 
portant element,  namely,  the  immense  amount  of  machinery, 
which  now  increases  a  hundred  fold  the  effectiveness  of  human 


32  THE    CAUSE    OF    HARD    TIMES. 

labor.  And  the  use  of  machinery  has  had  one  curious  effect 
which  Mill  entirely  overlooked  ;  namely,  that  its  owner  finds 
an  inducement  to  employ  it  in  the  production  of  consumable 
articles,  even  when  he  has  no  hope  or  expectation  that  he 
can  by  such  production  supply  himself,  directly  or  indirectly, 
with  any  consumable  article  for  his  own  use.  The  factory 
owner,  for  instance,  has  upon  his  hands  a  piece  of  property 
which,  if  idle,  will  involve  him  in  continued  expense  for  its 
care  and  its  protection  from  the  weather,  from  hie,  and  from 
thieves,  and  which,  in  spite  of  all  that  he  can  do  to  prevent 
it,  will  rapidly  deteriorate  through  rust  and  decay.  The 
owner  of  an  idle  factory  must  also  suffer  a  further  injury 
from  losing  the  skilled  workmen  who  have  been  accustomed 
to  run  his  machinery,  and  from  forcing  the  customers,  who 
have  been  in  the  habit  of  buying  his  products,  to  patronize 
rival  manufacturers  ;  for  to  fill  the  places  of  those  workmen 
and  to  find  new  customers,  when  his  factory  starts  up  again, 
must  certainly  involve  him  in  great  trouble  and  expense.  .  .  . 
In  order  to  avoid  the  loss  which  must  necessarily  come  to 
him  if  his  machinery  is  allowed  to  remain  idle,  he  will  em- 
ploy that  machinery  in  production,  even  when  he  knows  that 
the  articles  produced  must  be  sold  for  less  than  the  cost  of 
producing  them." 

"It  is  evident  that  during  recent  years  much  machinery 
has  in  fact  been  run  without  profit,  or  at  a  loss,  to  its  owners, 
—  run  simply  because  those  owners  believed  that  they  would 
suffer  a  smaller  loss  if  they  should  continue  to  run  it  than  if 
they  should  allow  it  to  lie  idle.  It  has  in  recent  years  been 
a  matter  of  common  observation  that  most  kinds  of  machin- 
ery have  been  created  of  a  capacity  in  excess  of  the  demands 
of  the  market  for  the  products  which  the  machinery  has  been 
adapted  to  produce.  There  has  hardly  been  a  branch  of  man- 
ufacture, open  to  free  competition,  in  which  the  machinery 
has  not  within  the  last  ten  years  been  run  for  long  periods 


THE   CAUSE    OF   HA.KD    TIMES.  33 

at  a  loss,  simply  because  its  owners  have  hoped  to  kill  oft' 
rival  manufacturers,  to  hold  the  market  in  anticipation  of 
better  times,  or  to  avoid  the  deterioration  and  expense  neces- 
sarily attendant  upon  idleness  ;  and  there  is  hardly  any 
branch  of  manufacture  to-day  —  unless  it  is,  through  a  patent 
right  or  otherwise,  in  the  enjoyment  of  a  monopoly  —  which 
is  not  endeavoring  to  limit  production  by  all  sorts  of  mutual 
agreements,  known  as  pools,  trusts,  etc.,  and  thereby  to  pre- 
vent the  continuance  or  recurrence  of  the  troubles  which  it 
has  experienced  and  of  the  losses  which  have  resulted  from 
the  excessive  amount  of  its  machinery  and  from  its  gen- 
eral capacity  of  production  in  excess  of  the  demands  of  the 
market." 


CHAPTER  VII. 

AN  EXCESSIVE  AMOUNT  OF  THE  MACHINERY  OF 
PRODUCTION  ACCOUNTED  FOR  AS  A  RESULT 
OF  AN  EXCESSIVE  DEMAND  FOR  INCOME- 
PRODUCING    INVESTMENTS. 

WE  have  seen  that  the  chief  feature  of  our 
recent  business  depressions  has  been  a 
general  excess  of  production  over  the  demand 
for  products  at  remunerative  prices,  a  condi- 
tion which,  under  the  name  of  "  general  over- 
production," the  professional  economists  have 
mistakenly  thought  they  had  proved  to  be 
impossible,  and  we  have  seen  further  how  an 
excessive  creation  of  the  machinery  of  pro- 
duction has,  through  the  competition  of  the 
owners  of  that  machinery,  made  this  general 
over-production  not  only  a  possible,  but  an 
actually  existing  phenomenon.  We  have 
next  to  consider  how  we  ma,y  account  for  the 
existence  of  this  excessive  amount  of  ma- 
chinery. 


THE  CAUSE   OF   HARD   TIMES.  35 

There  is  at  the  present  time  a  great 
demand  in  the  civilized  world  for  income- 
producing  investments,  meaning  thereby 
those  kinds  of  property  which  secure  to 
their  owners  annual  returns  of  income.  The 
wealthy  classes  depend  for  their  support  up- 
on the  income  which  they  derive  from  such 
investments,  and  the  same  is  true  in  the 
main  of  our  charitable  and  educational  insti- 
tutions, and,  in  a  less  degree,  of  the  poorer 
classes,  wrho  often  supplement  the  income 
derived  from  their  daily  wages  with  interest 
upon  a  deposit  in  a  savings  bank,  or  with 
dividends  upon  a  few  shares  in  the  stock  of 
a  corporation. 

We  are  apt  to  think  that  the  field  for  these 
income-producing  investments  is  unlimited 
in  extent,  but,  if  we  consider  carefully,  we 
shall  see  that  this  is  by  no  means  true.  We 
shall  find  that  such  investments  are  substan- 
tially limited  to  two  classes:  first,  those 
l>;ised  on  real  estate;  and  secondly,  those 
based  on  what  may  be  called  the  world's 
machinery  of  production  and  distribution, 
including  in  this  latter  class  factories,  ware- 


36  THE    CAUSE    OF   HARD    TIMES. 

houses,  railroads,  canals,  steamships,  sail- 
ing vessels,  and  the  other  like  aids  which 
mankind  has  learned  to  use  in  the  great  work 
of  creating  and  distributing  the  various  pro- 
duets  of  labor.  Most,  if  not  all,  income- 
ppoduemg  investments  will  be  found  to  be 
included  directly  or  indirectly  in  one  of 
these  two  classes.  Mortgages,  bonds,  and 
promissory  notes  derive  their  value  from  the 
real  estate  or  other  property  owned  by  the 
mortgagor  or  promisor,  and  the  book  of  a 
depositor  in  a  savings  bank  only  represents 
a  share  in  the  investments  which  the  bank 
has  made  with  the  funds  of  its  depositors. 

The  strict  limitation  of  the  amount  of  the 
first  of  these  two  classes  of  income-producing 
investments  is  evident.  The  income-pro- 
ducing real  estate  of  the  world  at  any  given 
time  is  not  only  plainly  limited  in  amount, 
but  is  also  substantially  secured  in  exclusive 
ownership.  The  limitation  of  the  other 
class,  —  that  of  the  machinery  of  production 
and  distribution,  —  is  not  at  first  sight  so 
clear.  If,  however,  it  be  true,  as  we  have 
stated  above,  that  such  machinery  may  be, 


THE    CAUSE    OF    HARD    TIMES.  37 

and  in  fact  in  recent  years  has  been,  created 
with  a  capacity  of  production  in  excess  of 
the  remunerative  demand  for  its  products, 
we  see  at  once  that  there  is  a  limit  to  this 
kind  of  investment  also,  —  that  there  is  a  limit 
to  the  amount  of  such  machinery  which  can 
find  any  profitable  employment,  —  the  over- 
stepping of  which  limit  leads  to  a  total  loss 
of  income  by  the  holders  of  the  investments, 
and  may  even  cause  a  change  in  the  char- 
acter of  the  investments  from  income-pro- 
ducing to  income-destroying.  It  appears 
then  that  the  field  for  the  investment  of 
capital,  so  that  it  shall  make  annual  returns 
of  income  to  its  owners,  is  distinctly  limited 
in  every  direction,  and  that  its  limits  have 
been  in  recent  times  distinctly  approached, 
and  even  in  some  cases  overstepped,  and 
thus  we  see  that  the  true  cause  of  this  over- 
production of  machinery  and  of  products  is 
to  be  found  in  an  excessive  desire  to  se- 
cure these  income-producing  investments,  — 
a  desire  that  has  led  to  a  creation  of  the 
machinery  of  production  and  distribution,  not 
only  up  to  the  limit  which  the  circumstances 


oS  THE   CAUSE    OF   HARD   TIMES. 

of  the  time  have  fixed  for  the  amount  of  that 
machinery  which  may  at  that  time  be  income- 
producing,  but  even  beyond  that  limit  into 
the  region  where  machinery  becomes,  not  in- 
come-producing, but  income-destroying. 


CHAPTER  VIII. 

THE  EXCESSIVE  DEMAND  FOR  INCOME-PRODU- 
CING INVESTMENTS  ARISES  FROM  AN  EX- 
CESSIVE DESIRE  TO  SAVE  RATHER  THAN 
TO    SPEND. 

WE  have  shown  that  there  may  be  in  the 
world  an  excessive  desire  to  secure 
income-producing  investments,  —  a  desire 
so  great  as  to  defeat  its  own  ends,  and  to 
convert  from  increasers  to  destroyers  of  in- 
come even  the  investments  which  have  been 
already  secured.  But  what  is  this  desire  for 
income-producing  investments  other  than  a 
necessary  result  of  the  much  lauded  virtue 
of  saving  ?  —  not,  indeed,  the  old-fashioned 
miser's  saving  of  his  coins  in  an  old  stock- 
ing, but  that  more  intelligent  saving,  which 
abstains  from  spending  one's  gains  or  wages 
to  secure  immediate  and  transient  comforts 
and   pleasures,    and,   instead,  devotes   those 


40  THE    CAUSE    OF    HARD    TIMES. 

gains  or  wages,  or  at  least  a  portion  of  them, 
to  what  economists  have  called  "productive 
consumption,"  —  to  the  creation  of  new 
machines  of  production  or  distribution,  in 
order  that  the  saver  may,  by  the  profits 
which  he  hopes  to  derive  from  that  machin- 
ery, secure  a  provision  against  the  needs  of 
old  age  or  of  ill  health,  or  may  guard  his 
own  future  or  that  of  his  children  against 
the  necessity  of  daily  labor. 

Here  we  reach  a  conclusion  very  difficult 
of  general  acceptance.  Saving  has  been 
quite  universally  accepted  as  a  virtue  to  be 
practised  at  all  times  and  under  all  circum- 
stances. Solomon  did  indeed  say,  "There  is 
that  scattereth,  and  yet  incrcaseth;  and  there 
is  that  withholdeth  more  than  is  meet,  but  it 
tendeth  to  poverty  "  (Proverbs  xi.  24) ;  but 
this  has  been  supposed  to  be  a  matter  in 
which  the  wisdom  of  Solomon  has  been  found 
to  be  wanting.  It  is  hard  to  bring  people 
to-day  to  believe  with  Solomon  that  the  gen- 
eral practice  of  saving  may  be  carried  to  such 
an  extent  as  to  be  excessive,  and  to  do  injury 
rather  than  srood  to  mankind.      It  is  hard  to 


THE  CAUSE    OF   HARD    TIMES.  41 

overturn  deep-seated  prejudices;  but  preju- 
dices must  at  last,  though  slowly,  yield  to 
reason.  We  have  seen  that  saving  for  the 
purpose  of  securing  income-producing  invest- 
ments (which  the  economists  recognize  as  the 
best  object  of  saving)  may  be  carried  to  such 
an  extent  as  to  overfill  the  possible  limits  of 
the  field  of  profitable  investments,  and  thus 
to  bring,  instead  of  benefit  to  mankind,  only 
the  enforced  idleness,  the  miseries,  and  the 
want  of  a  period  of  business  depression. 

As  the  troubles  of  the  recent  hard  times 
have  been  due  mainly  to  a  want  of  demand 
for  products,  —  to  a  failure  of  demand  to 
keep  pace  with  production,  —  we  can  see, 
further,  that  if  the  great  army  of  savers, 
instead  of  devoting  so  much  of  their  surplus 
funds  to  the  creation  of  superfluous  machin- 
ery of  production,  had  employed  more  of 
that  surplus  in  the  purchase  of  products  to 
be  consumed  for  their  own  immediate  com- 
fort or  pleasure,  not  only  would  the  super- 
fluous new  machinery  with  its  resulting 
troubles  never  have  been  culled  into  being, 
I  nit   these  very  people  would  have  themselves 


42  THE   CAUSE   OF    HARD    TIMES. 

created  an  added  demand  for  products,  —  a 
demand  that  would  have  kept  in  full  action 
all  the  old  and  also  some  new  machinery, 
would  have  kept  demand  up  to  an  equality 
with  supply,  would  have  prevented  all  the 
disastrous  results  of  the  competition  between 
the  owners  of  the  superabundant  machinery, 
and,  in  a  word,  would  have  prevented  en- 
tirely the  occurrence  of  any  hard  times. 

It  is  perhaps  well  here  to  caution  the  reader 
against  the  idea  that  the  author  of  these 
pages  fails  to  recognize  any  virtue  in  saving. 
No  one  can  admit  more  readily  than  he  docs 
that  human  progress  has  been  mainly  brought 
about  by  the  aid  of  this  virtue.  Except  for 
the  saving  of  the  past,  the  world  would  be 
without  all  the  immense  machinery  of  pro- 
duction and  distribution  which  exists  to-day, 
and  which  forms  perhaps  the  most  important 
element  of  our  civilization.  All  that  is  here 
claimed  is  that  economy  and  saving,  like 
most  other  good  things,  can  be  carried  too 
far,  —  so  far,  indeed,  as  to  cause  injury  rather 
than  benefit  to  mankind.  One  need  not  be 
supposed  to  deny  the  benefit  or  the  necessity 


THE   CAUSE    OF   HARD    TIMES.  43 

of  food  for  the  human  body,  because  he 
claims  that  the  gratification  of  an  inordinate 
desire  for  food  may  result  in  injury  to  health, 
or  even  in  the  destruction  of  life  itself.  It 
is  certainly  evident  that  if  all  men  should, 
in  their  desire  to  save  and  to  acquire  wealth, 
practise  the  strictest  economy,  live  on  the 
simplest  food  and  in  the  meanest  houses, 
wear  the  poorest  clothes,  and  abstain  from 
all  travelling  and  pleasure-seeking,  they 
would  render  all  machinery  of  production 
and  distribution  substantially  useless  and 
unprofitable,  and  would  find  that,  by  their 
extreme  efforts  to  save  and  grow  rich,  they 
had  defeated  their  own  purposes,  and  had 
rendered  valueless  the  hard  earned  and  much 
treasured  investments  of  their  past  savings. 
In  a  world  of  misers  the  investment  of  sav- 
ings would  necessarily  be  limited  to  the  old- 
fashioned  hoarding  of  gold,  for  there  would 
be  no  profit  in  the  ownership  of  idle  facto- 
ries, railroads,  steamships,  and  warehouses, 
and  even  real  estate,  if  there  were  no  trade 
in  the  shops  and  no  demand  for  desirable 
house  lots,  would  give  little  or  no  gain  to  its 


44  THE   CAUSE    OF    HARD   TIMES. 

owners.  So  long,  however,  as  mankind  are 
not  all  misers,  there  will  always  be  an  Oppor- 
tunity for  the  individual  to  gain  by  saving, 
although,  if  the  general  saving  of  the  whole 
community  be  excessive,  the  individual's 
gain  may  be  the  public's  loss.  In  advancing 
his  own  interests,  the  individual  may  add  to 
the  general  loss  arising  from  the  excessive 
creation  of  the  machinery  of  production  and 
distribution ;  as,  on  the  other  hand,  in  these 
days  of  business  depression,  a  man  might 
help  the  general  situation  by  spending  not 
only  his  income  but  his  principal  in  giving 
employment  to  idle  workmen.  He  would 
ruin  his  own  fortune  and  injure  himself,  but 
he  might  be  a  public  benefactor  by  setting 
some  of  the  wheels  of  business  in  motion. 

That  the  practice  of  economy  and  the 
acquisition  of  income-producing  investments 
has  in  recent  days  been  carried  too  far,  is 
not  to  be  wondered  at.  To  save  rather  than 
to  spend,  and  thereby  to  grow  rich,  has  been 
popularly  considered  to  be  almost,  if  not 
quite,  the  chief  end  of  man.  The  pulpit  and 
the  press  have  united  in  teaching  the  duty  of 


THE    CAUSE    OF   HARD    TIMES.  45 

economy.  Xo  man  has  been  thoroughly  re- 
spected by  his  neighbors  unless  he  has  been 
adding,  according  to  his  means,  to  his  store 
of  income-producing  investments.  The  me- 
chanic and  the  laborer  have  been  doing  this 
by  deposits  in  the  savings  banks,  the  depos- 
its in  those  institutions  in  the  small  State 
of  Massachusetts  alone  having  shown  an 
increase  even  during  the  hard  times  of  the 
year  ending  Oct.  31,  1894,  of  over  sixteen 
millions  of  dollars.1  The  citizen  that  has 
accumulated  investments  to  the  amount  of 
ten  thousand  dollars  has  been  endeavoring:, 
by  a  life  of  self-denial,  to  increase  those 
investments  to  a  hundred  thousand.  He 
that  has  had  a  hundred  thousand  has  been 
looking  forward  to  and  laboring  to  bring- 
about  the  time  when  he  might  enroll  himself 
among  the  millionaires.  He  that  has  had  a 
million  has  been  hard  at  work  to  triple  or 
quadruple  his  million  before  his  death.  And 
even  a  Vanderbilt,  an  Astor,  a  Gould,  a 
Russell  Sage,  or  a  Hetty  Green,  has  not  been 

1  See  Report  of  Massachusetts  Board  of  Commissioners  of 
Savings  Banks  for  1894. 


46  THE   CAUSE    OF   HARD   TIMES. 

content  unless  he  or  she  could  each  year  add 
mine  millions  to  his  or  her  already  immense 
accumulations. 

In  this  way  men  have  gone  on  increasing 
their  investments  in  the  machinery  of  pro- 
duction and  distribution,  unmindful  of  the 
fact  that  such  machinery  is  valuable  only  so 
far  as  it  creates  and  distributes  products  for 
which  the  market  furnishes  a  remunerative 
demand,  and  that,  if  that  demand  fails  to 
keep  pace  with  the  amount  of  products,  the 
machinery  of  production  must  be,  to  just  the 
extent  by  which  demand  lags  behind,  super- 
fluous, useless,  and  without  profit.  Men 
have  acted  as  if  they  supposed  it  to  be  pos- 
sible to  cut  down  to  the  lowest  limits  the 
consumption  of  products,  and  at  the  same 
time  to  afford  the  largest  field  for  the  profit- 
able employment  of  machinery  and  of  labor 
in  creating  and  distributing  those  products. 
Under  these  circumstances  it  is  not  strange 
that  machinery  has  been  created  with  a 
capacity  of  production  far  in  excess  of  the 
demands  of  the  market  for  its  products,  and 
that  products  have  actually  been  created  in 


THE  CAUSE  OF  HARD  TIMES.       47 

excess  of  these  demands.  The  supply  of 
products  has  been  continually  increasing, 
but  there  has  been  no  corresponding  increase 
in  the  demand  for  them.  At  last  the  owners 
of  the  machinery  have  been  forced  to  close 
their  factories  and  to  dismiss  their  workmen, 
and  by  that  very  act  they  have  made  the 
already  inadequate  amount  of  demand  still 
more  inadequate,  for  their  own  ability  and 
inclination  to  spend  is  greatly  lessened  by 
the  loss  of  the  profits  which  they  had  ex- 
pected to  derive  from  their  machinery,  while 
the  demand  of  the  dismissed  and  unemployed 
workmen  is  necessarily  reduced  to  a  bare 
call  for  the  simplest  necessaries  of  life. 


CHAPTER  IX. 

HOW  THE  LOST  EQUALITY  BETWEEN  PRODUC- 
TION AND  DEMAND  MAY  BEST  BE  RE- 
STORED. 

AS  we  have  found  it  to  be  true  that  the 
aggregate  of  production  may  be  in 
excess  of  the  aggregate  of  demand  at  remu- 
nerative prices,  and  as  we  have  found  that,  by 
reason  of  that  excess,  hard  times  have  been 
brought  about,  and  the  laboring  classes  have 
been  forced  to  be  idle  and  starving  in  the 
midst  of  plenty,  it  plainly  becomes  the  duty 
of  the  economist  to  study  how  this  inequality 
between  production  and  demand  may  best  be 
removed,  and  how  the  lost  equality  between 
these  two  elements  may  best  be  restored. 
It  is  evident  that,  in  order  to  restore  this 
lost  equality,  one  of  two  things  must  be 
done :  a  way  must  be  found  either  to  reduce 
production  or  to   increase    demand.     There 


THE    CAUSE    OF   HARD    TIMES.  49 

are  various  means  by  which  these  two  results 
may  be  reached,  and  it  is  surely  the  duty  of 
the  economist  to  study  carefully  these  vari- 
ous means,  and  to  point  out  those  which  are 
most  likely  to  be  on  the  whole  beneficial  in 
their  operation. 

On  the  one  hand,  production  may  be  dimin- 
ished by  wars,  riots,  floods,  and  conflagra- 
tions ;  by  the  refusal  of  mankind  to  avail 
itself  of  the  assistance  of  labor-saving  ma- 
chinery ;  by  the  enforced  idleness  of  large 
classes  of  people,  as  by  preventing  convicts 
in  prisons  from  performing  useful  labor;  by 
reducing  the  hours  of  labor  through  the 
adoption  of  eight-hour  laws  or  otherwise; 
or  by  the  closing  of  factories  and  the  stop- 
page of  machinery,  this  last  being  a  result 
which  has  frequently  been  brought  about  in 
recent  years  through  combinations  of  manu- 
facturers in  so-called  "trusts,"  whereby  the 
machinery  of  one  or  more  of  the  producers 
of  a  commodity  has  been  kept  idle  at  the 
joint  expense  of  all  the  producers  of  that 
commodity. 

On  the   other  hand,   demand   may  be    in- 

4 


50  THE    CAUSE    OF   HARD    TIMES. 

creased  by  the  action  of  government  in 
waging  costly  and  destructive  wars,  in  main- 
taining large  armies  and  navies  in  time  of 
peace,  and  in  the  erection  of  costly  public 
buildings  and  public  works.  It  may  also  be 
increased  by  a  more  liberal  expenditure  on 
luxuries  by  the  richer  classes,  or  by  a  more 
generous  use  of  wealth  in  charities  for  the 
poor.  A  larger  enjoyment  of  the  comforts  of 
life  by  the  poorer  classes  would  of  course 
increase  demand ;  but  this  mode  of  increase 
is  not  dependent  on  the  simple  volition  of 
the  poor  themselves,  for,  before  they  can 
increase  their  demand,  it  is  necessary  that 
they  should  receive  increased  wages,  or  at 
least  wages  which,  if  not  larger  as  measured 
in  currency,  are  larger  in  purchasing  power. 
And,  finally,  demand  may  be  increased 
through  the  opening  of  new  fields  for  the 
investment  of  capital,  as  would  happen,  for 
example,  if  a  new  mode  of  transportation 
were  invented  which  would  serve  as  a  substi- 
tute for  railroads. 

Most  of  these  methods  of  diminishing  the 
aggregate  of  production,  or  of  increasing  the 


THE   CAUSE    OF   HARD   TIMES.  51 

aggregate  of  demand,  are  evidently  remedies 
that  are  worse  than  the  disease  for  which  a 
cure  is  sought.  There  are,  however,  at  least 
two  of  these  suggested  remedies  that  may 
well  be  worthy  of  our  careful  attention.  If 
we  can  relieve  the  troubles  of  the  time  by 
increasing  the  demand  of  the  poor  for  com- 
forts and  luxuries,  or  by  reducing  the  hours 
of  labor  of  the  laboring  classes,  or  if  we  can 
effect  a  combination  of  these  two  remedies, 
whereby  the  poor  shall  both  enjoy  more  and 
labor  less,  shall  have  more  to  enjoy  and  more 
time  for  enjoyment,  a  good  result  will  surely 
be  accomplished.  At  all  events,  we  may 
conclude  that  this  new  conception  of  the  true 
province  of  political  economy  opens  for  us 
new  and  unexplored  fields  of  thought,  worthy 
of  careful  and  earnest  consideration. 


CHAPTER   X. 

WHY  THE  RECENT  HARD  TIMES  BEGAN  WHEN 
THEY  DID,  AND  HOW  SOON  WE  MAY  EX- 
PECT   THEM    TO    END. 

WE  have  seen  that  the  recent  hard  times 
have  been  caused  by  the  fact  thai, 
production  has  rim  ahead  of  demand,  and  we 
have  traced  the  causes  which  have  tended  to 
bring  about  this  excess  of  production.  It 
remains  for  us  to  discover  some  reason  why 
this  inequality  between  production  and  de- 
mand should  have  been  felt  in  the  United 
States  so  suddenly  and  so  severely  in  the 
summer  of  1893.  There  must  have  been  at 
that  time  something  to  cause  either  a  great 
and  sudden  increase  of  production  or  an 
equally  great  and  sudden  decrease  of  demand. 
There  was  evidently  no  reason  for  a  sudden 
development  at  that  time  of  the  desire  for 
income-producing  investments,  and  a  result- 


THE   CAUSE    OF   HARD   TIMES.  53 

ing  sudden  increase  of  the  machinery  of  pro- 
duction. There  was  no  such  cause,  and  no 
such  result.  There  was,  however,  a  sudden 
decrease  of  the  general  demand  for  products, 
and  the  cause  of  this  diminution  of  demand 
is  not  far  to  seek.lln  the  summer  of  1893 
there  was  in  the  United  States,  as  is  well 
known,  a  sudden  and  violent  panic  in  the 
business  community,  arising  out  of  a  fear 
that  gold  was  going  to  a  premium,  which 
panic  caused  a  general  locking  up  of  funds 
and  an  extreme  scarcity  of  money,  and  made 
the  current  rates  of  interest  unusually  high. 
There  were  many  failures,  and  all  classes 
were  frightened  and  began  to  economize. 
Sbopkpp.pftrs,  finding  that__their  trade  was 
falling  off,  feared  to  lay  in  their  usual  stocks 
of  goods.  Manufacturers  found  that  the  de- 
mand^ for  their  products  was  disappearing, 
andj3onsequently  began  to_reduce  the  number 
of  their  employees.  The  idle  employees 
""lygre~noJongcr jible  to  make  their  usual  pur- 
chases, and  the_stockholders~in  the~factories. 
who  were  expectingjbo  be  deprived  of  their 
usual  dividends,  reduced  largely  their  pm-- 


54  THE    CAUSE    OF   HARD   TIMES. 

chases  also.  Thus  everything  conspired  to 
reduce  demand,  thus  the  sudden  inequality 
between  production  and  demand  was  brought 
about,  and  thus  the  hard  times  were  begun77 
If  this  was  the  way  in  which  the  recent 
hard  times  began,  in  what  way  may  we  hope 
that  they  will  be  brought  to  an  end  ?  The 
hard  times  of  twentj7  years  ago  were  probably 
brought  to  an  end  in  the  United  States  by  a 
great  demand  from  Europe  for  our  grain. 
The  sale  of  their  grain  at  good  prices  brought 
prosperity  back  to  our  Western  farmers. 
They  began  again  to  purchase  freely  ;  demand 
began  to  grow  throughout  the  country ;  the 
machinery  of  production  began  to  be  busy 
again;  shopkeepers,  finding  that  prices  were 
beginning  to  rise,  thought  it  was  time  for 
them  to  fill  their  shelves  with  ample  stocks 
of  goods  for  future  sales ;  all  men  began  to 
be  hopeful  of  the  future  and  to  spend  freely 
again;  and  thus  the  tide  was  turned  and 
demand  increased  rapidly.  It  would  seem 
that  we  have  not  at  present  much  reason  to 
hope  that  we  may  feel  such  a  stimulus  to  the 
general  demand  for  products  as  was  furnished 


THE   CAUSE   OF   HARD    TIMES.  55 

twenty  years  ago  by  the  European  demand  for 
our  grain.  But  there  have  recently  been  some 
signs  of  improvement  in  business,  and  it  may 
well  be  that  a  sufficient  stimulus  to  start  us 
on  the  road  to  recovery  may  be  found  in  an 
increased  demand,  which  must  necessarily 
spring  up  at  last  after  a  season  devoted  to 
the  using  up  of  old  supplies  and  to  the 
emptying  of  shops  and  warehouses.  If  there 
can  be  but  the  beginning  of  such  an  increase 
of  demand,  we  may  well  hope  that  it  will 
continue  until  our  machinery  and  our  labor- 
ing men  and  women  are  all  busy  again, 
until  both  production  and  demand  are  again 
full  and  ample,  and  until  the  hard  times 
shall  have  fully  disappeared.  The  one  thing 
needed  is  only  an  increase  of  the  demand 
for  products.  This  may  of  course  be  most 
naturally  brought  about  by  an  increased  abil- 
ity to  purchase;  but  it  may  also  be  brought 
about  by  an  increased  inclination  and  readi- 
ness to  purchase,  arising  out  of  a  general 
disposition  to  take  a  more  hopeful  view  of 
the  future,  out  of  a  feeling  that  the  time  for 
saving  and  scrimping  has  passed,  and  that  a 


56  THE    CAUSE   OF   HARD    TIMES. 

more  liberal  scale  of  expenditure  may  finally 
be  indulged  in.  If  only  this  feeling  of  hope- 
fulness regarding  the  future  can  come  to  us, 
it  matters  not  on  what  the  feeling  is  founded, 
or  indeed  whether  it  is  well  founded  at  all. 
If  only  it  will  come,  it  will  work  out  the  ful- 
filment of  its  own  prophecies,  —  it  will  start 
the  increase  of  demand,  —  it  will  raise  de- 
mand to  an  equality  with  supply,  and  thus 
will  bring  us  to  the  end  of  the  present  hard 
times. 


CHAPTER   XI. 

HISTORICAL    FACTS    CONFIRMING    THE    AUTHOR'S 
THEORY. 

THE  recent  history  of  Europe  furnishes 
one  well-established  fact,  which  is 
wholly  inexplicable  except  on  the  theory 
advanced  in  this  book.  After  the  Franco- 
German  war  of  1871  France  was  left  with  its 
territory  devastated  by  the  armies  which  had 
fought  within  its  borders.  Its  farms,  its 
buildings  public  and  private,  its  factories, 
its  highways,  and  its  railroads  had  been 
ruined  and  destroyed,  and  it  had  been  com- 
pelled to  pay  an  enormous  sum  as  an  indem- 
nity to  its  victor.  Germany  had  however 
suffered  little  in  comparison.  The  battles 
had  not  been  fought  on  its  soil,  and  its 
expenses  in  the  war  had  been  in  large  pari 
repaid  to  it  by  the  milions  of  indemnity 
which    it  had  extorted  from  its  fallen   foe. 


58  THE    CAUSE    OF   HARD    TIMES. 

But  history  shows  that  under  these  circum- 
stances—  which,  according  to  all  accepted 
principles  of  political  economy  ought  to  have 
caused  prosperity  in  Germany  and  want  and 
distress  in  France  —  it  was  Germany  that 
suffered  from  hard  times,  the  general  depres- 
sion in  trade  after  1873  having  heen  felt- 
more  severely  in  Germany  than  in  either 
England  or  America,  while  France  was 
entirely  free  from  any  such  trouble.1 

1  Lest  the  reader  should  doubt  the  truth  of  the  historical 
statement  here  made,  the  following  quotation  is  given 
from  the  article,  already  referred  to,  by  Professor  Bonamy 
Price  in  the  Contemporary  Review  for  April,  1877  (pp.  779— 
783) : — 

"Commercial  depression  is  the  universal  cry,  a  commer- 
cial depression  probably  unprecedented  in  duration  in  the 
annals  of  trade,  except  under  the  disturbing  action  of  pro- 
longed war.  .  .  ,  Ample  evidence  abounds  on  all  sides  to 
show  its  extent  and  severity  in  England.  .  .  .  Have  other 
countries  bowed  their  heads  in  suffering  under  the  commer- 
cial depression  ?  Let  America  be  the  first  to  speak.  In 
1873  she  experienced  a  shock  of  the  most  formidable  kind. 
She  has  not  recovered  from  the  shock  at  this  very  hour.  .  .  . 
Let  us  visit  Germany,  —  Germany,  the  conqueror  in  a  great 
war,  and  the  exactor  of  an  unheard  of  indemnity.  What  do 
we  find  in  that  country  ?  Worse  commercial  weather  at  this 
hour  than  in  any  other.  Nowhere  are  louder  complaints  ut- 
tered of  the  stagnation  of  trade.  .  .  .  And  so  we  come  round 


THE   CAUSE    OF   HARD   TIMES.  59 

The  theory  here  presented  easily  accounts 
for  these  facts  by  showing  that  there  could 
have  been  in  France  no  hard  times,  with 
factories  and  laboring  men  in  want  of  em- 
ployment, at  a  time  when  all  the  machinery 
and  all  the  men  and  all  the  railroads  of  the 
country  were  hard  at  work  repairing  the 
waste  of  the  war.  In  Germany,  on  the  other 
hand,  a  period  of. great  prosperity  immedi- 

to  France,  the  people  whose  well-being  has  been  so  visited 
with  the  most  violent  assaults.  Her  losses  and  sufferings 
have  surpassed  those  endured  by  any  other  nation,  yet  the 
deep,  heavy  pressure  of  the  commercial  paralysis  has  weighed 
upon  her  the  least  oppressively  of  all.  War  has  desolated 
her  broad  fields  and  overthrown  her  industries  over  great 
areas  of  her  territory.  Her  taxation  has  been  suddenly  raised 
by  the  gigantic  sum  of  thirty  millions  of  English  pounds  a 
year.  .  .  .  Her  share  of  the  commercial  trial  has  been  the 
severest  and  largest  of  all ;  yet  at  this  hour  she  exhibits,  not 
the  melancholy  languor  of  business  men  in  other  countries, 
but  the  active  movements  of  quickened  recovery." 

It  seems  almost  incredible  that  the  above  should  have 
been  written  by  the  economist  who  traced  the  cause  of  the 
commercial  depression  of  which  he  wrote  simply  to  "over- 
spending, over-consuming,  destroying  more  wealth  than  is  re- 
produced, and  its  necessary  consequence,  poverty."  He  could 
argue  that  this  was  the  cause  of  the  trouble,  and  yet  admit 
that  the  result  was  the  smallest  where  the  cause  was  the 
greatest,  and  the  result  the  greatest  where  the  cause  was  the 
smallest. 


60  THE    CAUSE   OF   HARD    TIMES. 

ately  following  the  war,  —  a  time  when  new 
buildings  and  new  factories  were  erected  in 
large  numbers  to  make  ready  for  a  booming 
future  that  did  not  materialize,  —  was  suc- 
ceeded by  a  time  when  it  was  found  that  the 
nation  had  been  going  too  fast,  when  the 
rich  found  that  their  investments  were  not 
going  to  be  as  productive  of  income  as  they 
had  hoped  and  expected,  and  that  they  must 
therefore  stop  building  and  must  retrench 
their  expenses.  Thus  the  laboring  men 
began  to  lose  their  daily  employment  and 
daily  wages,  and  were  forced  to  economize 
also,  and  thus  hard  times  with  their  accom- 
panying distress  were  brought  about,  and 
Germany,  the  conqueror,  that  had  come 
lightly  out  of  the  war,  was  suffering  from  an 
enforced  idleness  of  its  people,  while  the 
people  of  France  were  enjoying  the  benefits 
of  an  enforced  activity  which  compelled 
eveiybody  to  be  busy.  In  a  similar  manner 
we  may  account  for  the  condition  of  the 
United  States  after  the  conclusion  of  the 
War  of  the  Rebellion.  During  that  war 
there   was    nowhere    complaint   of    enforced 


THE   CAUSE    OF   HARD    TIMES.  61 

idleness,  nor  was  there  such  complaint  for 
several  years  after  the  war  was  over.  Dur- 
ing those  years  there  was  much  to  be  done 
in  the  way  of  repairing  the  damage  and 
waste  that  the  war  had  caused,  and  there 
was  also  all  over  the  country  an  immense 
investment  of  capital  in  the  building  of  new 
shops  and  warehouses,  new  dwellings  to  be 

„Sold  or  let,  new  railroads,  and  new  factories. 
/  At  last,  however,  it  was  found  that  this 
investment  of  capital  had  been  overdone, 
that  there  were  more  new  shops  and  ware- 
houses than  there  was  demand  for,  that  there 
were  more  new  dwelling-houses  than  could 
be  sold  or  let,  and  that  there  were  more 
railroads  and  factories  than  profitable  em- 
ployment could  be  found  for.  Then  the 
laboring  classes,  whose  services  had  been  in 
great  demand  all  through  the  war  and  through 

'The  succeeding  years,  begariTcTmdthat  their 
em^lo^ers_Jiad^_no^further  need  of  their  ser- 
vices.  Then  those  who  had  made  the  un- 
profitable investments  began  to  see  that  they 
must  economize  and  consume  less  of  t lie 
products   of    labor.     Demand   on    all    sides 


62  THE   CAUSE    OF   HARD   TIMES. 

ra  pidlj  fell  off.  A^general  excess  of  p roducts 
beyond  the  demand  which  was  ready  to  pay 
a   remunerative  price  for  them  began  to  be^ 

i - 

evident,  and  the  hard  times  of  1873-74  were 
upon  us. 


CHAPTER   XII. 

SOME   PRACTICAL   CONCLUSIONS. 

THE  fact  which  we  have  endeavored  to 
establish,  of  the  existence  of  limits 
to  the  field  for  income-producing  invest- 
ments, suggests  several  conclusions  which 
are   important. 

The  first  is  that  the  immense  investments 
of  people  like  the  Vanderbilts,  the  Astors, 
and  the  Goulds  arc  mischievous  so  far  as 
they  tend  to  monopolize  the  whole  of  the 
world's  field  of  investment,  and  to  leave 
small  chance  for  the  generality  of  people  to 
make,  by  the  investment  of  their  smaller 
savings,  the  needed  provision  against  the 
wants  of  old  age  or  of  sickness.  It  will  be 
unfortunate  if  the  time  shall  ever  come  when 
a  few  families  will  have  secured  in  their  own 
exclusive  possession  the  ownership  of  all,  or 
of  substantially  all,  the  real  estate  and  the 


64  THE    CAUSE    OF   HAliD    TIMES. 

machinery  of  production  and  distribution, 
and  will  have  left,  as  the  only  possible  in- 
vestment of  savings  open  to  the  multitude, 
the  hoarding  of  gold  and  silver  and  jewels  in 
safe-deposit  vaults  or  in  old  stockings.  Such 
a  result  would  operate  to  destroy  in  the 
greater  portion  of  mankind  that  virtue  of 
providence,  of  thought  for  the  future,  which 
has  done  so  much  to  advance  civilization. 

Secondly.  The  theories,  of  which  much  is 
heard  at  present,  which  would  exclude  all 
individual  ownership  from  real  estate  and 
from  railroads,  telegraphs,  gas-works,  water- 
works, and  the  like,  would  greatly  restrict 
the  limits  of  the  field  for  the  profitable  in- 
vestment of  capital,  and  would  thus  render 
it  much  more  difficult  than  it  is  to-day  for 
individuals  to  find  income-producing  invest- 
ments for  their  possible  savings,  and  men 
would  thus  have  small  inducement  to  refrain 
from  living  from  hand  to  mouth,  and  from 
taking  no  thought  for  the  morrow,  and  would 
be  led  to  neglect  that  provision  for  the 
future  which  is  so  important  an  element  for 
human  welfare. 


THE    CAUSE    OF    HAKD   TIMES.  65 

Thirdly.  The  overcrowding  of  the  field 
for  income-producing  investments  is  causing 
a  reduction  in  the  rate  of  income  to  be 
derived  from  invested  property,  and  though, 
in  the  course  of  its  development,  this  brings 
us  to  times  of  general  distress,  the  process 
is  in  its  final  result  a  beneficent  one,  for,  as 
I  have  written  in  a  previous  publication,1 
"A  reduction  in  the  rate  of  income  from 
invested  property  means,  in  the  final  analy- 
sis, that  the  world  pays  less  than  it  has 
before  been  paying  for  the  use  of  its  machin- 
ery; that  labor  is  obtaining  a  larger,  and 
capital  a  smaller  share  of  the  compensation 
paid  for  production;  that  of  the  price  of 
every  article  purchased  for  consumption  by 
the  rich  or  by  the  poor  a  greater  proportion 
goes  to  pay  for  the  labor,  whether  of  hand  or 
of  brain,  that  has  been  expended  on  its  pro- 
duction or  its  transportation,  and  less  for  the 
use  of  the  machinery  which  has  helped  to 
produce  it  or  to  transport  it  to  the  consumer. 
The  evils,  then,  which  result  from  an  exces- 
sive investment  of  capital  in  machinery,  are 

1   "Over-production  ami  Commercial  Distress,"  p.  29. 
5 


66  THE    CAUSE    OF   HARD   TIMES. 

only  temporary.  The  evils  of  general  over- 
production, of  glutted  markets,  and  of  en- 
forced idleness  and  consequent  want  among 
the  poor,  are  only  the  results  of  the  irregu- 
lar flowing  of  a  stream  whose  general  course 
tends  surely  towards  the  improvement  of 
mankind,  and  the  lessening  of  the  inequal- 
ities between  the  rich  and  the  poor.  It  has 
been  my  purpose  to  show  how  the  irregulari- 
ties in  the  flow  of  this  stream,  the  temporary 
chokings  of  its  current,  have  been  caused, 
and  how  depression  in  trade  has  resulted 
from  these  irregularities  in  the  working  of  a 
process,  which,  if  it  were  regular  and  not 
too  rapid,  would  operate  only  to  the  good  of 
mankind."  x 

Fourthly.  If,  as  has  been  argued,  the  clos- 
ing of  factories  and  the  throwing  of  laborers 
out  of  employment  find  their  original  cause 
in  an  excessive  desire,  on  the  part  of  the 
general  public,  to  acquire  income-producing 
investments,  and  in  a  consequent  overcrowd- 

1  The  first  few  lines  of  this  quotation  were  quoted  by  Hon. 
David  A.  Wells  in  his  "Recent  Economic  Changes,"  p.  430, 
but  without  giving  any  credit  to  their  author. 


THE   CAUSE    OF   HARD    TIMES.  67 

ing  of  the  limited  field  for  such  investments, 
it  would  seem  that  the  sufferers  from  the 
results  thus  brought  about  might  fairly  have 
some  claim  on  that  public,  as  represented  by 
the  government  of  the  city,  state,  or  nation, 
for  relief  from  the  suffering  thus  created. 
If  the  action  of  the  community  as  a  whole, 
through  the  general  excess  of  its  desire  to 
accumulate  investments,  is  such  as  to  leave 
labor  unemployed  and  starving  in  the  midst 
of  abundance,  may  not  the  idle  and  starving- 
laborers  fairly  claim  that  the  government, 
which  represents  the  community  at  large, 
shall  find  and  supply  them  with  that  employ- 
ment, that  means  of  earning  a  livelihood, 
which  individuals  have  failed  to  furnish  ?  A 
new  light  is  thus  thrown  on  the  question  of 
the  policy  of  establishing  public  workshops, 
and  of  carrying  on  public  improvements  for 
the  purpose  of  giving  employment  to  the 
idle.  The  objections  to  such  measures,  on 
grounds  not  here  noticed,  may  be  insuper- 
able ;  but  the  views  before  set  forth  suggest 
strong  arguments  why,  under  certain  circum- 
stances, it  may  be  the  duty  of  a  government 


68  THE    CAUSE    OF   HARD    TIMES. 

to  relieve  public  distress  by  employing  work- 
men on  a  large  scale  in  carrying  out  public 
improvements  which  would  not  otherwise  be 
undertaken. 

Fifthly.  An  argument  in  favor  of  a  pro- 
tective tariff  may  be  drawn  from  the  theory 
here  presented.  If  a  country,  on  account  of 
its  undeveloped  condition,  or  for  any  other 
reason,  affords  greater  opportunities  and  a 
larger  field  than  other  countries  for  the 
profitable  investment  of  capital,  it  is  pos- 
sible that  it  may,  by  limiting,  through  tariffs 
or  otherwise,  its  communication  with  other 
countries  where  the  field  of  investment  is 
more  crowded,  postpone  the  time  when  the 
effects  of  the  competition  between  investors 
will  cause  depression  in  trade,  hard  times, 
and  general  distress  within  its  own  borders. 
It  is  probably  true,  however,  that,  though  a 
country  may  by  a  protective  tariff,  which 
shuts  out  foreigners  from  competing  with 
native  production,  postpone  somewhat  the 
time  when  it  is  itself  to  suffer  from  some  of 
the  unpleasant,  though  necessary,  incidents 
of  its  progress  towards  a  diminution  of  the 


THE    CAUSE   OF   HARD    TIMES.  69 

profits  of  the  rich  and  idle,  and  an  increase 
of  the  profits  of  the  laboring  poor,  it  yet 
thereby  only  delays  the  march  of  its  own 
progress  in  civilization.  America,  with  its 
less  crowded  field  for  investment,  may  by  a 
tariff  keep  its  own  markets  for  its  own  pro- 
ducers, and  may  thereby  prevent  the  capital 
of  Europe  from  intruding  upon  and  taking 
possession  of  a  portion  of  that  field.  It  may 
thus  prevent  foreign  capital  from  competing 
with  its  own  capital  On  equal  terms,  and 
may  thereby  keep  its  rate  of  income  from 
investments  up  to  a  higher  figure  than  the 
European  rate.  In  ocean  commerce  English 
and  American  capital  have  competed  in 
recent  years  on  exactly  equal  terms;  and  the 
former,  being  the  cheaper  capital,  —  that  is, 
the  capital  that  is  content  with  the  lower 
rate  of  interest,  — has  necessarily  driven  out 
of  the  field  the  dearer  capital  of  America, 
and  the  destruction  of  the  foreign  commerce 
of  the  United  States  is  thus  seen  to  be  no 
result  of  protection  or  of  free  trade,  <>r  of 
any  legislation  or  want  of  legislation,  but  to 
be    simply   the   necessary   effect   of    the   law 


70  THE    CAUSE    OF   HARD   TIMES. 

which  gives  to  the  cheaper  capital  the  entire 
control  of  any  field  of  investment  to  which 
it  has  full  and  unrestricted  access.  And  if, 
by  the  removal  of  duties  or  otherwise,  Eng- 
lish capital  shall  be  enabled  to  compete  in 
our  markets  in  the  production  of  any  given 
article  of  manufacture,  with  only  the  slight 
item  of  the  cost  of  transportation  from  Eng- 
land to  America  operating  against  it,  we 
may  expect  it  to  be  as  efficient  as  in  the  case 
of  ship-owning  in  driving  American  capital 
out  of  that  field  of  investment,  or  at  least  in 
forcing  American  capital  to  be  content  with 
a  lower  rate  of  profit  than  it  had  previously 
been  accustomed  to.  On  the  other  hand,  if 
we  look  upon  the  maintenance  of  a  high  rate 
of  profit  for  capital  as  simply  the  mainte- 
nance of  high  prices  for  the  use  of  the 
machinery  of  production  and  distribution, 
and  of  low  prices  for  labor,  we  see  that  pro- 
tective tariffs,  though  they  may  sometimes 
postpone  the  coming  of  periods  of  general 
over-production  and  distress,  are  on  the  whole 
a  hindrance  to  the  onward  march  of  civili- 
zation and  to  the  general  improvement  of  the 
condition  of  mankind. 


CHAPTER   XIII. 

THE   ORIGIN   OF   "TRUSTS." 

ONE  of  the  results  plainly  traceable  to 
the  overcrowding  of  the  field  of  invest- 
ment has  been  the  formation  of  the  numerous 
so-called  "trusts,"  which  have  of  late  played 
an  important  part  in  the  manufacturing 
interests  of  the  country.  Whenever  it  has 
been  found  that  the  machinery  of  production 
in  any  branch  of  manufacture  has  been 
created  with  a  capacity  of  production  in 
excess  of  the  demands  of  the  market,  the 
different  manufacturers,  in  their  endeavors 
to  avoid  being  left  with  unsold  balances  of 
products  on  their  hands,  have,  as  has  been 
before  stated,  been  forced  to  dispose  of  those 
products  for  less  than  it  had  cost  to  produce 
them.  Production  having  grown  largely  in 
excess  of  demand,  it  has  been  necessary  that 
it  should  in  some  way  Ik-   reduced,  and,  as  no 


72  THE   CAUSE    OF   HARD   TIMES. 

single  manufacturer  has  been  willing  to 
allow  his  machinery  to  lie  idle  for  the  bene- 
fit of  his  competitors,  there  has  been  no  way 
left  except  for  all  those  engaged  in  the  busi- 
ness to  band  themselves  together  in  a  so- 
called  "trust,"  and  to  place  the  management 
of  the  business  of  all  in  the  hands  of  one 
man  or  of  a  few  men,  who  are  given  full 
power  to  determine  the  amount  of  production 
that  can  profitably  be  carried  on,  and  who 
can  order  the  stoppage  of  any  machinery  that 
they  may  deem  to  be  for  the  time  superflu- 
ous, —  the  owner  of  the  idle  machinery  re- 
ceiving, however,  his  full  proportion  of  the 
profits  of  the  whole  business.  Thus  in  vari- 
ous special  branches  of  manufacture  over-pro- 
duction has  been  prevented,  and  production 
has  been  limited  to  the  amount  at  which  the 
product  can  be  disposed  of  at  a  price  remu- 
nerative to  the  producer.  This  "trust" 
scheme  has  proved  in  practice  to  be  very 
efficient,  and  it  has  been  successful  in  secur- 
ing to  those  who  have  joined  in  forming 
these  combinations,  whether  their  machinery 
has  been  busy  or  idle,  a  handsome  income  on 


THE   CAUSE   OF   HARD   TIMES.  73 

their  investments.  Where,  however,  pro- 
ducers have  been  unable  or  unwilling  to 
unite  in  this  way,  and  have  endeavored  to 
escape  from  the  loss  which  they  would 
suffer  from  disposing  of  their  products  at 
less  than  cost  by  reducing  that  cost  through 
a  cutting  down  of  the  wages  of  their  em- 
ployees, they  have  found  that  they  have  not 
thereby  helped  the  situation,  inasmuch  as, 
the  whole  cause  of  the  trouble  being  an 
amount  of  products  in  excess  of  the  demand 
for  them,  a  mere  reduction  of  cost  without 
any  reduction  of  the  amount  produced  has 
had  but  little  effect  towards  equalizing  pro- 
duction and  demand,  and  thus  those  pro- 
ducers who  have  tried  to  remedy  the  evil  by 
a  simple  reduction  of  wages  have  found 
substantially  the  same  difficulty  in  disposing 
of  their  superfluous  products,  after  they  have 
thus  reduced  the  cost  thereof,  that  they  had 
found  before  that  reduction  had  taken  place. 


CHAPTER   XIV. 

THE  DIFFERENCE  BETWEEN  THE  AUTHOR'S 
VIEWS  AND  THOSE  OF  THE  ECONOMISTS 
A    RADICAL    ONE. 

THE  views  set  forth  in  this  book  are,  as 
has  been  before  stated,  in  direct  con- 
flict with  the  doctrine  of  the  impossibility 
of  general  over-production.  That  doctrine, 
however,  lies,  according  to  John  Stuart  Mill, 
at  the  basis  of  the  whole  of  the  accepted 
system  of  political  economy,  of  which  he 
may  be  considered  to  have  been  the  founder. 
Mill  says  of  it:  "The  point  is  fundamental. 
Any  difference  of  opinion  on  it  involves 
radically  different  conceptions  of  political 
economy,  especially  in  its  practical  aspect. 
On  the  one  view,  we  have  only  to  consider 
how  a  sufficient  production  may  be  combined 
with  the  best  possible  distribution ;  but,  on 
the  other,  there  is  a  third  thing  to  be  con- 


THE    CAUSE   OF   HARD   TIMES.  75 

sidered,  —  how  a  market  can  be  created  for 
produce,  or  how  production  can  be  limited 
to  the  capabilities  of  the  market."1  Mill's 
idea  seems  to  have  been,  that,  as  it  was 
impossible  that  there  should  be  a  general 
excess  of  production  over  demand,  it  was 
only  necessary  for  the  economist  to  consider 
how  to  promote  the  production  and  distribu- 
tion of  products ;  but  he  seems  strangely  to 
have  overlooked  the  consideration  that,  even 
if  it  was  impossible  that  production  should 
run  ahead  of  demand,  it  was  still  possible 
that,  the  two  being  as  it  were  tied  together, 
production  might  be  limited  and  held  back 
by  a  lagging  demand,  and  that  therefore  cir- 
cumstances might  still  exist  under  which 
the  only  way  to  promote  production  Avould  be 
by  finding  a  means  of  increasing  demand, 
and  that  therefore  his  own  conception  of 
political  economy,  —  namely,  that  its  only 
province  is  "to  consider  how  a  sufficient  pro- 
duction may  be  combined  with  the  best  pos- 
sible distribution,"  —  was   by  his  own  con- 

1  Principles  of  Political  Economy,  Book  III.  Chap.  XIV. 
sect.  4. 


76  THE   CAUSE    OF    HARD    TIMES. 

fession  "radically  different"  from  the  true 
conception,  and  that,  in  addition  to  produc- 
tion and  distribution,  there  was  really  a 
third  thing  to  be  considered,  namely,  "how 
a  market  can  be  created  for  produce."  We 
see,  therefore,  that  Mill's  system  of  political 
economy,  built  upon  the  consideration  of 
production  and  distribution  alone,  is  a  false 
system,  even  if,  as  Mill  claimed,  general 
over-production  is  impossible;  but  if,  as 
has  been  shown,  general  over-production  is 
not  only  possible,  but  a  matter  of  actual  and 
present  experience,  then  his  whole  concep- 
tion of  political  economy  is  doubly  proved 
to  be  false,  and  we  find  double  reasons  for 
adopting  what  he  calls  a  "radically  different 
conception  "  of  that  science. 


CHAPTER   XV. 

THE  ECONOMISTS'  EXPLANATION  OF  THE  TEN- 
DENCY OF  PROFITS  TO  A  MINIMUM  SHOWN 
TO    BE    ANTIQUATED    AND    INADEQUATE. 

MILL  had  much  to  say  of  the  "  tendency 
of  profits  to  a  minimum."  He  recog- 
nized the  existence  of  this  tendency,  and 
explained  it  as  follows:  "On  a  limited  ex- 
tent of  land  only  a  limited  quantity  of  capi- 
tal can  find  employment  at  a  profit.  As  the 
quantity  of  capital  approaches  this  limit, 
profit  falls.  When  the  limit  is  attained, 
profit  is  annihilated,  and  can  only  be  re- 
stored through  an  extension  of  the  field  of 
employment,  either  by  the  acquisition  of 
fertile  land,  or  by  opening  new  markets  in 
foreign  countries  from  which  food  and  mate- 
rials can  be  purchased  with  the  products  of 
domestic  capital."  1 

1  Principles  of  Political  Economy,  Book  IV.  Chap.  IV. 

sect.   1. 


78  THE    CAUSE    OF   HARD    TIMES. 

This  theory,  which  makes  the  rate  of  the 
profit  derivable  from  capital  to  depend  upon 
the  area  of  fertile  land,  might  have  some 
plausibility  if  income-producing  investments 
were  limited  to  agricultural  lands ;  but  in 
these  modern  days,  when  by  far  the  greater 
part  of  the  income  which'  capital  receives  is 
derived  from  the  ownership  of  lands  which 
produce  no  crops,  and  of  the  machinery  of 
production  and  distribution,  Mill's  theory 
is  seen  to  be  utterly  inadequate  and  anti- 
quated. The  theory  advanced  in  these  pages, 
however,  fully  explains  the  admitted  ten- 
dency of  profits  to  a  minimum,  by  referring 
it  to  the  tendency  of  mankind  to  accumulate 
income-producing  investments  of  all  kinds  at 
a  rate  faster  than  the  rate  of  growth  of  the 
possible  field  for  such  investments,  thereby 
gradually  crowding  that  field,  so  that  the 
competition  of  the  investors  gradually  forces 
down  the  rate  of  profit  which  can  be  obtained 
from  their  investments. 


CHAPTER   XVI. 

SOME   PROGNOSTICATIONS   AS   TO    THE   FUTURE. 

A  LTHOUGH  in  the  future  a  general  in- 
^  *■  crease  in  the  wages  of  labor,  or  other 
causes,  may  bring  about  an  increased  con- 
sumption of  and  demand  for  products,  and 
consequently  an  increased  use  for  the  ma- 
chinery of  production  and  distribution,  yet 
it  seems  probable  that  the  desire  to  obtain 
income-producing  investments  will  be  so 
general  and  so  powerful  that  the  field  for 
such  investments  will  hereafter  remain  per- 
manently crowded,  except  when  it  may  be 
cleared  for  a  time  by  the  destruction  due  to 
a  great  war,  or  by  an  invention  which  shall 
call  for  a  large  investment  in  a  new  kind  of 
machinery.  A  crowding  of  the  field  for 
investment  must  lead  to  severe  competition 
among  investors,  and  to  a  lessening  of  their 
profits.     Manufacturing  business,   therefore, 


80  THE   CAUSE    OF   HARD    TIMES. 

when  it  has  no  monopoly,  but  is  open  to  the 
competition  of  all  comers,  may  be  expected 
to  return  in  the  future  only  small  profits. 
Railroads,  if  free  from  competing  lines,  may 
however  expect  their  business  to  increase  in 
volume,  and,  if  free  from  too  much  legislative 
interference,  which  seems  now  to  be  their 
chief  danger,  may  be  expected  to  pay  hand- 
some dividends.  For  real  estate,  advanta- 
geously situated,  a  large  increase  in  rental 
value  may  be  anticipated,  which  will  make 
real  estate  a  desirable  form  of  investment, 
unless  too  great  a  portion  of  the  rents  deriv- 
able from  it  is  taken  by  taxation  to  be  wasted 
or  squandered  by  incompetent  or  corrupt 
governments.  Money  in  the  future  cannot 
be  expected  to  command  more  than  low  rates 
of  interest;  indeed,  it  is  probable  that  there 
will  be  a  general  and  continued  decline  in 
the  current  rate.  We  may  anticipate,  how- 
ever, that  the  development  of  the  results 
which  we  have  foreshadowed  will  not  be 
regular  and  uniform.  There  will  continue 
to  be  in  the  future,  as  there  have  been  in  the 
past,   periods  when    demand  will    be  abnor- 


THE    CAUSE    OF    HARD    TIMES.  81 

mally  increased  by  a  general  movement  to 
accumulate  stocks  of  goods  in  anticipation  of 
an  expected  rise  in  their  price,  and  periods 
also  when  demand  will  be  abnormally  dimin- 
ished by  the  causes  which  have  been  shown 
to  have  brought  about  hard  times;  but  it 
would  seem  that  the  general  tendency  must 
be  such  as  has  been  indicated. 

A  more  serious  question  arises  as  to  the 
probable  behavior  of  the  laboring  classes  in 
the  hard  times  which  are  sure  to  come  at 
intervals  in  the  future,  and  when  they  find 
themselves  again  and  again  unemployed  and 
starving  in  the  midst  of  plenty.  The  labor- 
ing classes  are  every  year  showing  them- 
selves to  be  more  and  more  ready  to  resort  to 
violence  in  attempts  to  right  their  supposed 
wrongs,  and  it  is  but  natural  to  expect  that 
they  will  grow  more  and  more  impatient  at 
each  repetition  of  the  experience  of  suffer- 
ing mysteriously  from  want  in  the  midst  of 
plenty,  and  that  they  may  at  any  time  strike 
blindly  and  with  violence  at  anything  that 
demagogues  lead  them  to  suppose  to  be  the 
cause  of  their  troubles.  Socialism,  with  its 
6 


82  THE   CAUSE    OF   HARD    TIMES. 

promises  of  relief  from  such  troubles,  may 
well  gain  much  support  in  the  future,  and 
may  even  succeed  in  putting  its  theories  into 
practice.  At  any  rate,  the  possible  results 
that  may  arise  from  the  influence  of  future 
hard  times  upon  the  general  advance  of 
civilization  are  so  important,  that  a  careful 
study  of  the  causes  of  these  periods  of  busi- 
ness depression  is  well  worthy  of  the  con- 
sideration of  all  thoughtful  men. 


CHAPTER  XVII. 

A  MORE  TECHNICAL  ARGUMENT,   ADDRESSED   PAR- 
TICULARLY  TO    PROFESSIONAL   ECONOMISTS. 

IT  was  claimed  by  John  Stuart  Mill,  and 
it  is  now  claimed  by  economists  gen- 
erally, that  "  general  over-production  "  is,  in 
the  nature  of  things,  an  impossibility.  Un- 
fortunately, Mill  gave  no  clear  definition  of 
the  meaning  of  the  term  "general  over-pro- 
duction"; and  we  are  left  to  extract  his  idea 
of  that  meaning  from  his  general  discussion 
of  the  subject.  Let  us  examine,  first,  what 
Mill  has  said  regarding  the  nature  of  simple 
over-production,  — i.  e.  the  over-production  of 
a  single  commodity,  —  and  afterwards  we 
can  pass  to  the  consideration  of  the  more 
complex  idea  of  general  over-production. 

Fortunately,  we  find  in  Mill  what  amounts 
to  a  definition  of  "over-supply,"  a  term  by 
which  he  expressed  the  result  of  "  over-pro- 


8-4  THE    CAUSE    OF    HARD    TIMES. 

duction."  He  states  that  "dearth  or  scar- 
city, on  the  one  hand,  and  over-supply,  or,  in 
mercantile  language,  glut,  on  the  other,  are 
incident  to  all  commodities.  In  the  first 
case  the  commodity  affords  to  the  producers 
or  sellers,  while  the  deficiency  lasts,  an 
unusually  high  rate  of  profit;  in  the  second, 
the  supply  being  in  excess  of  that  for  which  a 
demand  exists  at  such  a  value  as  will  afford 
the  ordinary  profit,  the  sellers  must  be  con- 
tent with  less,  and  must  in  extreme  cases 
submit  to  a  loss. "  1  From  this  statement  we 
may  fairly  assume  that  Mill's  idea  of  over- 
production was  this:  a  production  which 
affords  a  supply  in  excess  of  that  for  which 
a  demand  exists  at  such  a  value  as  will 
afford  the  ordinary  profit,  while  by  the  corre- 
sponding term,  under-production,  he  meant  a 

1  Principles  of  Political  Economy,  Book  III.  Chap.  XIV. 
sect.  1.  I  understand  that  in  this  place  Mill  by  "ordinary 
profit "  meant,  not  the  average  rate  of  profit  of  the  immedi- 
ate time  under  consideration,  but  an  average  rate  of  profit 
determined  by  the  experience  of  a  series  of  years.  In  this 
sense  it  may  properly  be  said  that  the  average  rate  of  profit 
during  a  year  of  hard  times  is  less  than  the  "ordinary  "  rate, 
the  average  rate  for  that  year  being  less  than  that  of  preced- 
ing or  succeeding  years. 


THE    CAUSE    OF    HAKD   TIMES.  85 

production  which  affords  a  supply  so  defi- 
cient in  amount  that  the  demand  affords  to 
the  producer  an  unusually  high  rate  of  profit. 
These  definitions  leave  us,  however,  in  some 
doubt  as  to  the  standard  by  which  the  profit 
which  is  thus  made  the  test  of  over-produc- 
tion is  to  be  measured.  A  slight  examina- 
tion, however,  will  suffice  to  show  that  the 
profit  which  is  to  be  regarded  in  determin- 
ing whether  a  product  has  or  has  not  been 
over-produced  is  not  a  profit  above  the 
actual  cost  of  the  product,  but  a  profit  above 
what  it  would  cost  at  the  time  of  the  sale  to 
reproduce  the  product;  for  it  often  happens 
that,  by  reason  of  improved  mechanical  pro- 
cesses, the  producer  of  a  commodity  which 
has  not  been  produced  to  an  excessive 
amount  is  forced,  by  the  competition  of  the 
producers  of  the  later  and  cheaper  article, 
to  dispose  of  his  own  product  without  profit, 
or  at  a  loss  as  compared  with  the  actual  cost 
of  its  production.  In  such  case,  however, 
the  producer  properly  attributes  bis  failure 
to  secure  a  profit  to  the  change  in  the  meth- 
ods of  production,  and  not  to  any  excessive 


86  THE    CAUSE    OF   HARD    TIMES. 

amount  of  production.  If,  however,  a  com- 
modity will  not  sell  at  the  ordinary  profit 
over  "what  it  costs  at  the  time  of  sale  to 
reproduce  it,  there  is  certainly  the  best  of 
evidence  that  there  has  been  an  excessive 
production,  resulting  in  an  excessive  supply 
of  the  commodity,  —  a  production  which  is 
mistaken  and  in  error  solely  as  to  the  amount 
produced,  and  which  is,  therefore,  properly 
called  an  over-production. 

We  thus  reach  the  following  definition  of 
over-production;  namely,  a  production  result- 
ing in  a  supply  in  excess  of  that  for  ivliich  a 
demand  exists  at  such  a  value  as  will  afford 
the  ordinary  profit  over  what  the  reproduction 
of  the  commodity  would  cost.  This  definition 
of  over-production  corresponds,  as  we  believe, 
with  the  idea  of  it  held  by  Mill,  and  also 
with  the  ordinary  idea  of  the  practical  man 
of  business,  who,  to  state  this  matter  shortly, 
considers  that  a  commodity  has  been  over- 
produced when  it  would  not  pay  to  increase 
the  supply  of  it.1 

1  Except  for  the  fact  that  the  above  definition  follows  the 
form  of  expression  adopted  by  Mill,  we  should  prefer  the  fol- 


THE    CAUSE    OF   HAED   TIMES.  87 

The  kind  of  demand  above  referred  to, 
namely,  the  demand  for  a  commodity  at 
such  a  value  as  will  afford  the  ordinary 
profit  over  the  necessary  cost  of  its  produc- 
tion, will,  in  order  to  avoid  unnecessary  ver- 
biage, be  referred  to  in  this  chapter  simply 
as  remunerative  demand. 

If  such  be  the  meaning  of  over-production, 
as  applied  to  a  single  commodity,  what  is 
meant  by  "  general  over-production  "  ?  Let 
us  look  first  for  such  light  on  this  point  as 
we  can  obtain  from  Mill.  His  statement  is, 
that,  "  because  this  phenomenon  of  over-sup- 
ply, and  consequent  inconvenience  or  loss  to 
the  producer  or  dealer,  may  exist  in  the  case 
of  any  one  commodity  whatever,  many  per- 
sons, including  some  distinguished  political 
economists,  have  thought  that  it  may  exist 
with  regard  to  all  commodities,  — that  there 
may  be  a  general  over-production  of  wealth,  a 

lowing  as  a  definition  of  over-production  :  —  A  production  of 
a  commodity  creating  a  supply  in  excess  of  that  for  which  a 
demand  exists,  which  is  prepared  to  give  in  exchange  for  the 
commodity  an  amount  of  labor  of  the  time  of  the  exchange 
equal  to  the  amount  of  labor  which  would  be  required  for  the 
reproduction  of  the  commodity. 


05  THE    CAUSE    OF    HARD    TIMES. 

supply  of  commodities  in  the  aggregate  sur- 
passing the  demand."  And  he  says  further, 
that  these  mistaken  economists  "agree  in 
maintaining  that  there  may  be,  and  some- 
times is,  an  excess  of  productions  in  general 
beyond  the  demand  for  them,  and  that,  when 
this  happens,  purchasers  cannot  be  found  at 
prices  which  will  repay  the  cost  of  production 
with  a  profit."1  To  prevent  any  possible 
misunderstanding,  it  may  here  be  remarked 
that  it  is  evident  that  Mill  did  not  by  gen- 
eral over-production  mean  an  over-produc- 
tion of  every  individual  product,  nor  indeed 
an  over-production  of  a  majority  of  products, 
but  an  aggregate  of  production  of  all  pro- 
ducts in  excess  of  the  aggregate  of  adequate 
demand  for  all  products ;  in  other  words,  an 
over-production  of  one  or  more  products 
without  any  corresponding  and  equivalent 
under-production  of  some  other  product  or 
products.  That  this  was  Mill's  idea  is 
shown  further  by  his  statement  that,  when 
economists  mistakenly  suppose  that  general 

1  Principles  of  Political  Economy,  Book  III.  Chap.  XIV. 
sect.  1. 


THE    CAUSE    OF    HAKD    TIMES.  89 

over-production  exists,  the  real  trouble  is 
that  the  producer  "has  produced  a  thing  not 
wanted  instead  of  what  was  wanted.  .  .  . 
There  is  no  over-production.  Production  is 
not  excessive,  but  merely  ill-assorted."1 

The  question  of  the  possibility  of  general 
over-production  is  thus  reduced  to  this  form. 
Is  it  possible  that  there  should  exist  at  any 
time  an  over-production  of  one  or  more  pro- 
ducts, unless  there  is  at  the  same  time  a 
corresponding  under-production  of  some  other 
product  or  products  ?  In  other  words,  is  it 
possible  that  one  product  should  be  selling 
for  less  than  the  ordinary  profit  over  the  cost 
of  its  reproduction,  unless  some  other  pro- 
duct is  at  the  same  time  selling  at  more  than 
the  ordinary  profit  over  the  cost  of  its  repro- 
duction ?  Such  is  the  question  which  we 
have  now  to  consider. 

1  Principles  of  Political  Economy,  Book  III.  Chap.  XIV. 
sect.  3.  By  "over-production"  in  this  passage  Mill  evi- 
dently means  "general  over-production."  That  Mill's  idea 
is  not  misrepresented  may  be  .shown  by  the  passage  already 
quoted  from  Macvane's  recent  work  :  "It  is  quite  impossi- 
ble that  all  products  should  be  in  excess  of  demand  at  one 
and  the  same  time.  If  the  swpply  of  some  things  is  excessive, 
the  supply  of  other  things  is  deficient  to  the  same  extent." 


90  THE    CAUSE    OF   HARD    TIMES. 

In  examining  this  question  we  shall  for 
the  present  pass  by  the  somewhat  compli- 
cated arguments  by  which  Mill  and  others 
have  endeavored  to  show  that  general  over- 
production is  not  possible,  and  shall  offer  an 
argument  by  which  we  think  it  can  be  shown 
affirmatively  that  general  over-production  is 
possible.  For  the  purposes  of  this  argument 
we  lay  down  the  following  proposition:  — 

If  at  any  time  there  is  a  production  of  a 
commodity  not  based  upon  and  strictly  pro- 
portioned to  the  remunerative  demand  for  it, 
but,  with  the  knowledge  of  the  producer,  in  ex- 
cess of  that  demand,  then  there  may  at  such 
time  be  an  over-production  of  that  commodity 
and  no  corresponding  under-production  of  any 
other  commodity .  In  other  words,  there  may 
be  in  such  case  a  general  over-production. 

In  proof  of  this  proposition,  it  would  seem 
to  be  sufficient  to  say,  that  if,  in  addition  to 
such  production  as  is  based  on  and  propor- 
tioned to  remunerative  demand,  there  is 
another  and  further  production  which  goes 
on  regardless  of  that  demand,  then  it  is  evi- 
dent that  there  can  be  no  reason  why  the 


THE    CAUSE  OF  HARD  TIMES.  91 

aggregate  of  production  may  not  exceed  the 
aggregate  of  demand ;  or,  in  other  words, 
no  reason  why  an  under-production  should 
necessarily  accompany  every  over-produc- 
tion. 

We  are  thus  brought  to  consider  whether 
a  production  which  is  not  proportioned  to 
but  regardless  of  remunerative  demand  may 
actually  exist,  and  we  reach  our  second  prop- 
osition, which  is  as  follows  :  — 

A  production  of  a  commodity  not  based  upon 
and  strictly  proportioned  to  the  remunerative 
demand  for  the  product,  but,  with  the  knowl- 
edge of  the  producer,  in  excess  of  that  demand, 
may  arise,  and  has  in  some  cases  actually  arisen, 
when  machinery  for  the  production  of  the  com- 
modity has  been  created  with  a  capacity  of 
production  in  excess  of  the  remunerative  de- 
mand for  the  product. 

That  many  kinds  of  machinery  with  an 
excessive  capacity  of  production  have  actu- 
ally been  created  in  recent  years,  is  a  fact 
so  widely  known  that  it  can  hardly  be  dis- 
puted. And  when  this  excessive  machinery 
is,  as   is   usually  the   case,  the   property  of 


92  THE   CAUSE    OF   HARD   TIMES. 

different  competing  producers,  the  now 
familiar  result  is  brought  about  that  these 
competitors  find  at  last  that  there  is  no  re- 
munerative demand  for  all  their  products. 
Some  producer's  machinery  must  stop  its 
work,  or  all  the  producers  will  be  forced  to 
dispose  of  their  product  at  less  than  the 
ordinary  profit,  or  even  at  a  loss.  But  stop- 
page itself  involves  a  loss,  and  ordinarily 
a  greater  loss  than  continued  production. 
The  owner  of  idle  machinery  has  upon  his 
hands  a  costly  article  of  property,  which 
involves  him  in  continual  expense  for  its 
care  and  for  its  protection  from  the  weather, 
from  fire,  and  from  thieves,  and  which,  in 
spite  of  all  that  he  can  do  to  prevent  it,  will 
rapidly  deteriorate  through  rust  and  decay. 
He  will  also,  in  allowing  his  machinery  to 
stop,  suffer  a  further,  and  in  most  cases  a 
more  serious,  loss  from  parting  with  and 
scattering  beyond  recall  the  skilled  workmen 
who  have  been  running  that  machinery,  and 
from  driving  the  customers  who  have  been 
in  the  habit  of  buying  his  products  to  seek 
elsewhere  for  their  usual  supply  ;    and  it  is 


THE   CAUSE   OF   HARD    TIMES.  93 

well  known  that  a  course  of  trade,  once 
diverted,  is  not  easily  restored  to  its  old 
channel.  Under  these  circumstances  it  is 
evident  that  a  large  and  powerful  body  of 
producers  —  namely,  the  owners  of  the  ma- 
chinery of  production  —  may  well  be  brought, 
and  in  fact  in  many  recent  cases  have  ac- 
tually been  brought,  to  the  creation  of  pro- 
ducts to  an  amount  not  based  upon  and 
strictly  proportioned  to  the  remunerative 
demand  for  those  products,  but  based  mainly 
on  their  own  desire  to  save  and  protect  their 
machinery  and  their  business.  In  order  to 
save  and  protect  these  important  elements  of 
wealth,  men  are  ready  and  willing  to  main- 
tain a  production  which  not  only  involves  no 
profit,  but  which  often  brings  to  them  actual 
loss.  Thus  we  find  it  to  be  true  that  there 
may  be  a  production  which  is,  with  the 
knowledge  of  the  producer  and  intentionally, 
in  excess  of  remunerative  demand;  and  the 
conclusion  is  reached  that  there  may  be  an 
over-production  without  any  correspond in<i 
under-production;  or.  in  other  words,  that 
there  may  be  a  general  over-production. 


94  THE    CAUSE   OF   HARD    TIMES. 

The  same  conclusion  may  be  reached  by  a 
shorter,  and  perhaps  to  some  a  more  satis- 
factory argument,  as  follows.  If  men  were 
ready  to  engage  in  production,  not  solely  in 
order  to  meet  the  remunerative  demand  for 
products,  but  also  that  they  might  gratify  a 
desire  for  muscular  exercise,  it  surely  could 
not  be  denied  that  production  in  the  aggre- 
gate might  in  such  case  be  brought  to  exceed 
the  aggregate  of  remunerative  demand. .  And 
the  result  cannot  be  different  if  that  which 
men  desire  to  keep  active  in  the  work  of  pro- 
duction is  not  their  natural  muscles,  but  the 
machinery  which  serves  as  an  artificial  aid 
to  those  muscles. 


CHAPTER   XVIII. 

A   HARVARD   PROFESSOR'S   QUESTION. 

AT  the  midwinter  examinations  at  Har- 
vard College  in  1895,  the  following 
question  was  put  to  the  students  in  "  Econo- 
mics I."  " Suppose  everybody  resolved  to 
consume  productively  only,  what  would  be  the 
result  ? "  As  I  felt  very  curious  to  know 
what  the  Harvard  economists  would  consider 
to  be  the  true  answer  to  this  question,  I 
wrote  to  Prof.  W.  J.  Ashley,  who  according 
to  the  Harvard  Catalogue  stood  at  the  head 
of  "Economics  I.,"  that  I  should  feel  greatly 
obliged  to  him  if  he  would  inform  me  what 
he  considered  to  be  the  true  answer  to  this 
question.  Prof.  Ashley  wrote  me  in  reply 
that  he  did  not  himself  set  the  question, 
but  that  he  imagined  the  examination  paper 
which  contained  it  was  prepared  by  his  asso- 
ciate, Prof.  Cummings.     Prof.  Ashley  addeYl, 


96  THE   CAUSE    OF    HARD    TIMES. 

that  he  supposed  "that  the  question  was  set 
to  ascertain  whether  the  student  had  really 
read  his  Mill  carefully,  especially  the  last 
paragraph  of  Book  I.  Chap.  III.,"  and  that 
he  imagined  that  his  "colleagues  would  hold 
that  the  answer  might  properly  depend  on 
conditions  of  time  and  place."  As  the  only 
"  conditions  of  time  and  place  "  that  could 
be  involved  in  the  question  appeared  to  me 
to  be  simply  those  of  the  present  time,  and  of 
our  planet,  the  earth,  and  as  upon  referring 
to  my  Mill  I  could  get  no  light  from  the 
paragraph  to  which  Prof.  Ashley  referred 
me,  I  wrote  to  Prof.  Edward  Cummings  ask- 
ing him  what  he  considered  to  be  the  true 
answer  to  the  question  which  he  had  pro- 
posed. As  I  received  no  reply  to  my  note, 
I  wrote  Prof.  Cummings  a  second  time,  sug- 
gesting that  my  first  note  might  have  called 
for  so  elaborate  an  answer  that  he  had  felt 
disinclined  to  answer  it,  and  that  therefore  I 
would  modify  my  question  and  ask  simply 
"Would  the  result  be  an  increase  of  the 
wealth  of  the  world  ?  "  a  question  that  would 
require  for  answer  only  a  simple  "  Yes  "  or 


THE    CAUSE    OF   HARD    TIMES.  97 

"No."  As  Prof.  Cummings  has  not  vouch- 
safed to  me  the  ordinary  courtesy  due  from 
one  gentleman  to  another  who  has  asked  him 
a  civil  question,  —  if  he  was  afraid  to  commit 
himself  by  an  answer,  he  might  at  least  have 
replied  that  his  business  was  to  put,  not  to 
answer,  questions  in  political  economy,  —  I 
have  been  forced  to  abandon  all  attempts  to 
learn  how  a  Harvard  Professor  answers  one 
of  his  own  questions. 

As,  however,  the  Professor's  question 
seems  to  be  one  which  deserves  a  careful 
answer,  I  will  myself  give  it  some  considera- 
tion. "  Suppose  everybody  resolved  to  con- 
sume productively  only,  what  would  be  the 
result  ?  "  The  first  result  would  evidently 
be  an  immediate  and  total  stoppage  of  the 
consumption  of  and  demand  for  all  sorts  of 
luxuries,  and  for  all  those  comforts  of  liv- 
ing which  do  not  contribute  to  mankind's 
efficiency  in  production.  Men  would  eat 
simple  but  nutritious  food,  would  wear  cheap 
and  common  clothing,  would  live  in  plain 
and  simply  furnished  houses,  would  travel 
but  little,  would  have  but  the  smallest  use 

7 


98  THE   CAUSE    OF   HARD    TIMES. 

for  theatres  or  hotels,  and  would  seldom 
employ  any  domestic  servants,  male  or 
female.  The  hundreds  of  thousands  who 
are  now  employed  in  supplying  all  the  un- 
productive consumption  of  the  world  would 
lose  their  employment,  and  be  forced  to  look 
about  to  see  how  they  could  find  occupation 
in  supplying  that  demand  for  productive 
consumption  which,  by  the  conditions  of  the 
question,  would  be  all  the  demand  that  would 
be  left  in  existence.  Now  to  what  would  the 
Professors  have  these  people  turn  their  atten- 
tion ?  To  what  products  would  they  have 
them  devote  their  labors  ?  Should  they  all 
become  cheap  tailors  and  hat-makers  and 
boot-makers,  and  manufacture  millions  of 
coats,  hats,  and  boots  to  be  piled  up  in  ware- 
houses waiting  for  a  demand  that  could  never 
catch  up  with  the  supply  ?  Or  should  they 
build  factories  and  railroads  and  steamships, 
for  which,  in  the  diminished  demand  for 
those  things  in  a  world  which  abstained 
entirely  from  unproductive  consumption, 
there  would  be  no  use,  and  which  would  be 
built  only  to  rot  and  rust  and  decay,  unused 


THE   CAUSE   OF    HAKD   TIMES.  99 

and  unusable  ?  Surely  no  one  would  claim 
that  men  should  employ  their  time  in  the 
production  of  any  superfluous  products  such 
as  we  have  mentioned.  It  follows,  then, 
that  if  "everybody  resolved  to  consume  pro- 
ductively only,"  one  result  would  be  that  it 
would  not  be  possible  to  find  full  employ- 
ment for  everybody,  and  that  every  one 
would  be  idle  a  good  part  of  the  time,  or 
that  many  would  be  idle  all  the  time.  Or, 
to  put  it  more  simply,  if  "everybody  re- 
solved to  consume  productively  only,"  not 
half  the  productive  capacity  of  mankind 
would  be  called  into  action. 

And,  secondly,  what  would  be  the  result 
as  regards  the  wealth  of  the  world  ?  Would 
that  wealth  be  increased  or  diminished  ?  An 
immediate  result  would  certainly  be  that  all 
the  wealth  that  was  invested  in  articles  of 
unproductive  consumption  or  in  machinery 
for  the  production  or  distribution  of  such 
articles  would  become  useless,  and  conse- 
quently valueless.  In  this  way  the  wealth 
of  the  world  would  certainly  be  diminished. 
Is  there  any  way  in  which  there  could  be  an 


100  THE    CAUSE    OF  HARD    TIMES. 

increase  of  wealth  to  compensate  for  this 
certain  decrease  ?  There  could  be  no  wealth 
in  the  ownership  of  things  that  nobody 
wanted.  In  a  world  where  every  one's 
wants  were  the  simplest,  there  would  be  but 
the  smallest  profit  in  the  ownership  of  the 
warehouses,  shops,  factories,  railroads,  and 
ships  that  would  be  needed  to  keep  those 
wants  supplied.  Wealth  could  not  increase, 
men  could  not  grow  rich,  for  it  would  be 
impossible  for  men  to  find  new  income-pro- 
ducing investments,  and  the  income  to  be 
derived  from  old  investments  would  be  re- 
duced to  the  lowest  limits.  We  arrive,  then, 
at  the  conclusion  that  the  result  of  mankind's 
resolve  to  consume  productively  only  must 
be  general  idleness  and  a  large  decrease  of 
the  world's  wealth.  I  have  not  been  able  to 
find  in  Mill  or  in  the  writings  of  the  profes- 
sors of  political  economy  any  suggestion  oi' 
any  of  these  results,  and  when  I  ask  the  pro- 
fessors what  opinions  they  hold  on  these  sub- 
jects, they  either  fail  to  take  any  notice  of 
my  questions,  or,  like  Jack  Bunsby,  —  who, 
when  delivering  his  opinions,   was  wont  tu 


THE   CAUSE    OF   HARD   TIMES.  101 

add,  "The  bearings  of  this  observation  lays 
in  the  application  on  it,"  —  they  reply  that 
the  answer  to  the  question  "  might  properly 
depend  on  conditions  of  time  and  place." 
It  may  amuse  one  to  speculate  how  high  a 
mark  the  student  would  have  received  who 
should  have  been  brilliant  enough  to  write 
down  this  answer  to  the  question  in  his 
examination  paper. 


CHAPTER   XIX. 

PREVIOUS    WRITINGS    BY    THE    AUTHOR    AND    BY 
OTHERS    ON    THE    SUBJECT    OF    THIS    BOOK. 

THE  views  presented  in  this  book  were 
first  suggested  by  this  author  in  a 
communication  printed  in  the  Boston  Daily 
Advertiser  in  its  issue  for  August  8,  1877. 
That  communication  was  followed  at  inter- 
vals by  numerous  others  in  the  Boston  Ad- 
vertiser, the  Boston  Transcript,  the  New 
York  Nation,  and  in  other  papers.  The 
author  also  set  forth  his  views  somewhat 
at  length  in  an  article  entitled  "  Saving 
versus  Spending,"  which  appeared  in  the 
Atlantic  Monthly  for  December,  1878.  All 
his  earlier  writings  on  this  subject  were 
collected  by  him  in  1884  in  a  pamphlet 
entitled  "Excessive  Saving  a  Cause  of  Com- 
mercial Distress. "  That  pamphlet  was  fol- 
lowed   in   1886   by    another,    entitled   '"The 


THE   CAUSE    OF   HARD   TIMES.  103 

Depression  in  Trade  and  the  Wages  of 
Labor,"  and  in  1887  by  still  another,  entitled 
"Over-production  and  Commercial  Distress." 
The  author  has  also  contributed  two  articles 
to  the  Quarterly  Journal  of  Economics,  the 
first  entitled  "General  Over-production," 
which  appeared  in  the  number  for  April, 
1887,  and  the  other  entitled  "The  Over-pro- 
duction Fallacy,"  which  appeared  in  the 
number  for  April,  1892,  and  an  article  by 
him,  entitled  "Diminishing  Returns  from 
Investment,"  appeared  in  the  Social  Econo- 
mist for  April,  1893. 

For  the  views  of  other  writers  on  the  sub- 
jects discussed  in  this  book  the  following 
references  are  here  given :  — 

Wealth  of  Nations,  by  Adam  Smith,  Book 

I.  Chap.  IX.,  Of  the  Profits  of  Stock;  Book 

II.  Chap.  III.,  Of  the  Accumulation  of  Cap- 
ital, or  of  Productive  and  Unproductive 
Labor.  —  Principles  of  Political  Economy,  by 
Rev.  T.  R.  Malthus,  Chap.  VII.,  sect.  3,  Of 
Accumulation,  or  the  Saving  from  Revenue 
to  add  to  Capital,  considered  as  a  Stimulus 
to  the  Increase  of  Wealth;  sect.  10,  Applica- 


104  THE    CAUSE    OF   HARD    TIMES. 

tion  of  some  of  the  Preceding  Principles  t<  i 
the  Distress  of  the  Laboring  Classes  since 
1815,  with  General  Observations.  —  Political 
Economy,  by  Dr.  Thomas  Chalmers,  Chap. 
III.,  On  the  Increase  and  Limit  of  Capital; 
Chap.  V.,  On  the  Possibility  of  a  General 
Glut. —  Treatise  on  Political  Economy,  by 
Jean-Baptiste  Say,  Book  I.  Chap.  XL, 
Of  the  Formation  and  Multiplication  of 
Capital;  Chap.  XV.,  Of  the  Demand  or 
Market  for  Products.  —  Letters  to  Mr. 
Malthus  on  various  Subjects  of  Political 
Economy,  particularly  on  the  Causes  of 
the  General  Stagnation  of  Commerce,  by 
Jean-Baptiste  Say.  —  Principles  of  Political 
Economy  and  Taxation,  by  David  Ricardo, 
Chap.  XXL,  Effect  of  Accumulation  on 
Profits  and  Interest;  Chap.  VI.,  On  Profits. 

—  Elements  of  Political  Economy,  by  James 
Mill,  Chap.  IV.,  sect.  1,  Of  Productive  and 
Unproductive  Consumption;  sect.  3,  That 
Consumption  is  co-extensive  with  Production. 

—  Principles  of  Political  Economy,  by  John 
Stuart  Mill,  Vol.  I.  Book  I.  Chap.  V.,  Fun- 
damental  Propositions  on  Capital,   sect.   3; 


THE    CAUSE    OF    HARD    TIMES.  105 

Chap.  XI.,  Law  of  Increase  of  Capital,  sect. 
4;  Vol.  II.  Book  III.  Chap.  XIV.,  Excess  of 
Supply;   Book  IV.   Chap.   IV.,   Of  the  Ten- 
dency of  Profits  to  a  Minimum;    Chap.  V., 
Consequences  of  the  Tendency  of  Profits  to  a 
Minimum. — -Chapters  on  Political  Economy, 
by  Prof.  Bonamy  Price,  Chap.   IV.,  Capital. 
—  Article  entitled  "One  Per  Cent,"  by  Prof. 
Bonamy  Price,  in  the  Contemporary  Review 
for  April,  1877.  —  The  Economy  of  Consump- 
tion,   by  Robert    Scott   Moffat.  —  Principles 
of  Political  Economy,  by  J.  R.  MacCulloch, 
Part  I.  Chap.  II.,  sect.  3,  Accumulation  and 
Employment  of  Capital ;  Chap.  VII.,  Causes 
of  Gluts;  Part  III.  Chap.  VII.,  Circumstances 
which  determine  the  Average  Rate  of  Profits  ; 
Part  IV., Consumption  of  Wealth. — American 
Political  Economy,  by  Prof.  Francis  Bowen, 
Chap.  XVII.,  The  Rate  of  Profit  as  affected 
by  the  Limited  Extent  of  the  Field  for  the 
Employment    of    Capital :     The    Theory    of 
Cluts.  —  Principles  of  Political  Economy,  by 
Prof.  William  Roscher,  Am.  Ed.,  translated 
by  John  J.   Lalor  (1882),  sect.  23,  Equilib- 
rium between  Production  and  Consumption; 


106  THE   CAUSE    OF    HARD    TIMES. 

sect.  215,  Necessity  of  the  Proper  Simultane- 
ous Development  of  Production  and  Consump- 
tion; sects.  216,  217,  Commercial  Crises  in 
General ;  sect.  220,  When  Saving  is  Injuri- 
ous: sect.  221,  Limits  to  the  Saving  of  Capi- 
tal.—  Final  Report  of  the  Royal  Commission 
appointed  to  inquire  into  the  Depression  of 
Trade  and  Industry  (printed  in  1886). — First 
Annual  Report  of  the  U.  S.  National  Bureau 
of  Labor,  by  Hon.  Carroll  D.  Wright.  —  Two 
articles  by  Mr.  F.  B.  Hawley,  the  first  in 
the  National  Quarterly  Review  for  July, 
1879,  entitled  "The  Ratio  of  Capital  to  Con- 
sumption," and  the  second  in  that  Review 
for  October,  1879,  entitled  "The  Rationale  of 
Panics  ";  also  a  book  published  by  the  same 
gentleman  in  1882,  entitled  "Capital  and 
Population."  — ■  An  article  by  Mr.  Edsvard 
F.  Sweet,  in  the  Chicago  Times  for  April 
26,  1880.  —  Recent  Economic  Changes,  by 
Mr.  David  A.  Wells. —  Article  on  "Trusts," 
by  Mr.  Andrew  Carnegie,  in  the  North 
American  Review  for  Februaiy,  1889.  — 
An  article  on  "Industrial  Depressions,  their 
Cause    and    Cure,"    by    Mr.     Frederick    H. 


THE    CAUSE    OF   HARD   TIMES.  107 

Cooke,  in  the  American  Journal  of  Politics 
for  December,  1893.  —  Involuntary  Idleness, 
by  Hugo  Bilgram.  —  The  Fallacy  of  Saving, 
by  John  M.  Robertson.  — A  Fundamental 
Principle  of  Political  Economy,  a  pam- 
phlet by  Edgar  J.  Rich.  — The  Physiology  of 
Industry,  by  A.  F.  Mummery  and  J.  A.  Hob- 
son.  —  The  Evolution  of  Modern  Capital- 
ism, by  John  A.  Hobson.  —  These  last  two 
books,  published  in  England  in  1889  and 
1894,  present  views  and  arguments  substan- 
tially the  same  as  those  presented  in  the 
preceding  pages. 

In  closing,  it  may  be  well  to  say  that 
no  professional  economist  has  ever  publicly 
recognized  the  validity  of  the  theories  and 
arguments  set  forth  in  this  book.  On  the 
other  hand,  Prof.  J.  Laurence  Laughlin, 
Prof.  Silas  Macvane,  and  Mr.  T.  B.  Veblen 
have  published  attempted  refutations  of  those 
theories  and  arguments,  and  Prof.  Arthur 
L.  Perry,  Prof.  W.  G.  Sumner,  Prof.  F.  W. 
Taussig,  and  Prof.  Charles  F.  Dunbar  have 
privately  expressed  to  this  author  their  entire 
dissent  from  his  views,  the  last-named  gen- 


108  THE   CAUSE   OF    HARD   TIMES. 

tleman  having  confined  himself  to  a  simple 
expression  of  such  dissent,  and  having  re- 
fused to  enter  in  the  slightest  degree  into  a 
discussion  of  the  grounds  of  such  dissent, 
apparently  deeming  this  author's  views  to  be 
entirely  unworthy  of  his  consideration,  and 
it  may  be  added  that  Mr.  John  A.  Hobson, 
whose  two  works  are  mentioned  above,  has 
written  this  author  that  he  has  had  a  similar 
experience  with  the  English  economists,  no 
one  of  whom,  he  says,  "  shows  the  least  incli- 
nation to  give  any  consideration "  to  his 
theory. 

Lest  the  reader  should  be  surprised  at 
the  fulness  of  the  foregoing  statement  of 
the  general  repudiation  of  the  author's  views 
by  the  professional  economists,  the  author 
desires  to  say  that  he  does  this  only  in  order 
to  prevent  these  economists  from  protesting, 
when  the  truth  of  the  views  here  presented 
finally  becomes  apparent  to  them,  that  they 
were  never  foolish  enough  to  deny  such  self- 
evident  propositions,  but  that  they  had  always 
maintained  and  asserted  them. 


INDEX. 


Page 

Ashley,  Prof.  W.  J.     His  answer  to  a  question  95 
Atkinson,  Edward.     His  view  of  general  over- 
production        17 

Bilgram,  Hugo.     Reference  to  book  by  .     .     .  107 
Bowex,    Prof.    Francis.      Reference    to    his 

"  American  Political  Economy "     .     .     .     .  105 

Carnegie,  Andrew.    On  over-production  caused 

by  excessive  machinery 27 

His  statement  based  on  that  of  this  author  .  31 

Reference  to  article  by  him 106 

Chalmers,    Dr.    Thomas.     Reference    to  his 

works 104 

Commerce.     Competition  of  English  and  Ameri- 
can capital  in 69 

Cookk,  Frederick  H.     Reference  to  article  by 

him 106 

Cummings,  Prof.  Edward.     His  question,  and 

his  failure  to  answer  it 95,  96 

Demand.     What  economists  mean  by  .     .     .     .9,84 

Remunerative  demand 87 

Falling  off  of,  the  immediate  cause  of  hard 

times 8 

What  may  be  done  to  increase  demand    .     .  50 


110  INDEX. 


Pace 


Dunrar,  Prof.  Charles   F.      Has   expressed 

dissent  from  this  author's  views      ....     107 


France.     Not  troubled   by   hard    times    after 

Franco-German  war  of  1871 57 

Frewen,  Moreton.     His  view  of  general  over- 
production       16 

Future.     Prognostications  as  to  the   ....       79 

General  Over-production.     What  is  meant 

by •.     ....     14, 26,  83 

Economists  claim  that  it  is  impossible     .     .       15 

John  Stuart  Mill  on 15,21,83 

Prof.  Silas  Macvane  on 19 

Practical  men  believe  that  it  has  actually 

existed 18 

Shown  to  be  possible 23,  26,  83 

A  result   of  an  excessive   amount  of   ma- 
chinery   23,  26,  91 

Germany.     Hard  times  in,  after  the   Franco- 
German  war  of  1871 57 

Hard  Times.     Principal  Characteristics  of   .     .  7 

How  relief  from  may  be  obtained  ....  48 

Immediate  cause  of  the  recent  hard  times    .  52 

How  those  of  1873  arose 62 

Harvard  Professor.    Question  propounded  by  95 

Hawley,  F.  B.     Reference  to  articles  by  .     .     .  106 

Hobson,  John  A.     Reference  to  books  by          .  107 

His  experience  with  English  economists  .     .  108 


INDEX.  Ill 

Page 

Income-producing  Investments.     Importance 

of 35,64 

The  field  for,  a  limited  one 35 

Will  remain  crowded  in  the  future      ...  79 

Great  demand  for 35 

Monopolizing  of        63 

Effect  of  a  reduction  of  the  rate  of  income 

from 65 

Interest.  Rate  of,  falls  in  hard  times  ...  8 
Lower  rates  may  be  expected  in  the  future  .       80 

Labor.  Effect  of  shortening  the  hours  of  .  49,  51 
Duty  of  government  to  find  employment  for  66 
Probable  behavior  of,  in  the  future      ...       81 

Laughlin,  Prof.  J.  Laurence.    Has  published 

attempted  refutation  of  this  author's  views  .     107 

MacCulloch,  J.  R.     Reference  to  his  works     .     105 

Machinery.     Excess  of 13 

When  excessive  in  amount,  causes  over-pro- 
duction   23,  91 

Run  at  a  loss  to  save  greater  loss  from  stop- 
page   23,  92 

Excess  of,  a  result  of  excessive  demand  for 
income-producing  investments    ....       34 

Limit  to  the  amount  of,  that  can  find  profit- 
able employment 37 

Macvane,  Prof.  Silas.     On  general  over-pro- 
duction     19,  89 

Has  published  attempted  refutation  of  this 
author's  views 107 

Malthus,  Rev.  T.   R.     Reference  to  his  works     103 


112  INDEX. 

Page 
Mill,  James.     Reference  to  his  works      .     .     .     104 

Mill,  John   Stuaiit.     Held  general    over-pro- 
duction to  be  impossible     ....    15,21,83 
Deemed  the  point  to  be  fundamental  ...       74 
His  explanation  of  the  "  tendency  of  profits 

to  a  minimum  " 77 

"What  he  meant  by  general  over-production  83,  87 

Reference  to  his  works 104 

Moffat,  Robert  Scott.     Reference  to  book  by     105 
Mummery,  A.   W.     Reference  to  book  by    .     .     107 

Over-production.      What  is  meant  by      .     .     14,  83 
Caused  by  excessive  amount  of  machinery     23,  91 

Andrew  Carnegie  on  this  point 27 

David  A.  AVells  on  this  point 29 

Perry,  Prof.  Arthur  L.     Has  expressed  dis- 
sent from  this  author's  views 107 

Price,  Prof.  Bonamy.   His  explanation  of  hard 

times "...       11 

His  statement  of  comparative  condition  of 
France  and  Germany  after  Franco-Ger- 
man war 58 

Reference  to  his  works 105 

Production.    Excessive  capacity  of     ...     .       13 
How  it  may  be  diminished 49 

Railroads.     Effect  of  hard  times  on   .     .     .     .  8,  9 

Future  prospects  of 80 

Real  Estate.      As  an  investment  in  the  future  80 

Ricardo,  David.    Reference  to  his  works     .     .  104 

Rich,  Edgar  J.    Reference  to  pamphlet  by  .     .  107 


INDEX.  113 
Page 

Robertson,  John  M.  Reference  to  book  by  .  107 
Roschek,  Prof.  William.     Reference   to   his 

Political  Economy 105 

Royal  Commission  on  Depression  of  Trade, 

Report  of 106 

Saving.    Desire  for  may  be  excessive  ....  39 

Solomon  on  excessive 40 

Effect  of  excessive 43,  95 

Extent  to  which  saving  is  carried  ....  44 

Say,  Jeax-Baptiste.     Reference  to  his  works  .  104 

Smith,  Adam.  Reference  to  his  works  .  .  .  103 
Sumner,  Prof.  W.    G.     Has  expressed  dissent 

from  this  author's  views 107 

Sweet,  Edward  F.     Reference  to  article  by      .  106 

Tariff.  Reasons  for  and  against  a  protective  .  68 
Taussig,  Prof.  F.  W.     Has  expressed  dissent 

from  this  author's  views 107 

Tendency  of  Profits  to  a  Minimum     ...  77 

Trusts,  Origin  of 71 

Effect  of 49 

Undbr-CONSUMPTION.     What  is  meant  by     .     .  14 

Vkisi.kn,  Mr.  T.  B.    Has  published  an  attempted 

refutation  of  this  author's  views     ....  107 

Wak.     As  a  means  of  relief  from  hard  times      49,  50 

Effect  of  Franco- German 57 

Effect  of  our  War  of  the  Rebellion      ...  60 

Wealth.      Effect  upon,  of  excessive  saving  .     43,  95 

7 


114  INDEX. 

Page 

Wells,  David  A.     On  over-production  caused 

by  excessive  machinery 29 

His  statement  based  on  that  of  this  author  .  31 
Unacknowledged  quotation  from  this  author 

by  him 66 

Reference  to  his  "Recent  Economic  Changes"  106 

Wright,  Carroll  D.    Reference  to  report  of  .  106 


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